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© 2022 International Monetary Fund
WP/23/39
IMF Working Paper
African Department
Global Supply Chain Disruptions: Challenges for Inflation and Monetary Policy in Sub-Saharan Africa
Prepared by Zo Andriantomanga, Marijn A. Bolhuis, Shushanik Hakobyan*
Authorized for distribution by Luc Eyraud
February 2022
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
ABSTRACT:
The Covid-19 pandemic has led to a large disruption of global supply chains. This paper studies the implications of supply chain disruptions for inflation and monetary policy in sub-Saharan Africa. Increases in supply chain pressures have had a sizeable impact on headline, food, and tradable inflation for a panel of 29 sub-Saharan African countries from 2000 to 2022. Our findings suggest that central banks can stabilize inflation and output more efficiently by monitoring global supply chains and adjusting the monetary policy stance before the disruptions have fully passed through into all inflation components. The gains from monitoring supply chain disruptions are particularly large for open economies which tend to experience outsized second-round effects on the prices of non-tradable goods and services.
| JEL Classification Numbers: | E31, E37, E52, F41, F44, Q43 |
| Keywords: | Inflation; global supply chains; sub-Saharan Africa; shipping costs; monetary policy; core inflation; food prices; oil price |
| Author’s E-Mail Address: | andrian2@uwm.edu, mbolhuis@imf.org, shakobyan@imf.org |
| JEL Classification Numbers: | E31, E37, E52, F41, F44, Q43 |
| Keywords: | Inflation; global supply chains; sub-Saharan Africa; shipping costs; monetary policy; core inflation; food prices; oil price |
| Author’s E-Mail Address: | andrian2@uwm.edu, mbolhuis@imf.org, shakobyan@imf.org |
Zo Andriantomanga
University of Wisconsin-Milwaukee
Marijn A. Bolhuis International Monetary Fund
Shushanik Hakobyan International Monetary Fund
Title Page
WORKING PAPERS
Global Supply Chain Disruptions: Challenges for Inflation and Monetary Policy in Sub-Saharan Africa
Prepared by Zo Andriantomanga, Marijn A. Bolhuis, Shushanik Hakobyan1
Contents
1. Introduction
2. Global supply chain pressures and inflation in sub-Saharan Africa
3. Data
4. Impact of supply chain pressures on inflation
4.1 Local projections methodology
4.2 Results
4.3 Robustness checks
5. Contributions of supply chain pressures to the surge in inflation
6. Implications for monetary policy
7. Conclusions
References
Appendix
Annex I. Data
Annex II. Structural Model
FIGURES
Figure 1. Global supply chain pressures and shipping costs
Figure 2. Median inflation in sub-Saharan Africa
Figure 3. Impact of a one standard deviation shock of GSCPI, oil and food prices on measures of inflation
Figure 4. Robustness checks
Figure 5. Contributions of GSCPI shocks to inflation (y-o-y percent change)
Figure 6. Central Bank objective function
TABLES
Table 1. Summary statistics
Table 2. Local projection estimates
APPENDICES
Figure 1. Contribution of global supply shocks to inflation
Figure 2. Residuals
Figure 3. Weight of CPI components
Figure 4. Stylized economy responses to supply chain shock (backward-looking central bank)
Appendix Table 1. Economies
Appendix Table 2. Data sources
The authors would like to thank Aqib Aslam, Luc Eyraud, Papa N’Diaye, Sergii Meleshchuk, Robert Zymek, and seminar participants at the International Monetary Fund for useful comments and suggestions. We thank Samson M’boueke and Seung Mo Choi for their help with collecting the inflation data.
The authors would like to thank Aqib Aslam, Luc Eyraud, Papa N’Diaye, Sergii Meleshchuk, Robert Zymek, and seminar participants at the International Monetary Fund for useful comments and suggestions. We thank Samson M’boueke and Seung Mo Choi for their help with collecting the inflation data.