Global Supply Chain Shocks and Inflation in a Diversifying Oil Economy: Sustainability Implications for Saudi Arabia

This study examines the effects of global supply chain shocks on inflation in Saudi Arabia, using monthly data from January 2014 to March 2026. Supply chain resilience has emerged as a critical dimension of economic sustainability, yet its inflationary consequences in commodity-dependent economies remain insufficiently understood. The analysis applies both Structural Vector Autoregression (SVAR) and Local Projection (LP) models to estimate impulse response functions. Inflation is measured using the wholesale price index (WPI) and its primary components. Findings from both methodologies are consistent, demonstrating that global supply chain shocks have positive, statistically significant impacts on most measures of wholesale price inflation in the short to medium term. The magnitude and persistence of these effects differ across components. In proportional terms, the most pronounced responses are found in ores and minerals and agricultural products—sectors closely tied to food security and sustainable resource management. However, their contribution to the aggregate WPI depends on their relative weights, with higher-weight categories, particularly metal products, machinery and equipment and food-related products, contributing more to aggregate wholesale price movements. Although the effects diminish in statistical significance over longer horizons, the cumulative responses indicate that supply chain disruptions can leave a persistent upward effect on wholesale price levels across specific categories, even after the direct inflationary impulse has subsided. These findings underscore the importance of building supply chain resilience as part of broader strategies for sustainable economic stability, with direct implications for monetary policy and inflation management in resource-dependent economies.