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Beyond Energy: Inflationary Effects of Metals Price Shocks in Production Networks
Author:
Jorge Miranda-Pinto
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,
Andrea Pescatori
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,
Martin Stuermer
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, and
Xueliang Wang
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Series:
IMF Working Papers
Volume/Issue:
Volume 2024: Issue 215
Language:
English
Publication Date:
22 Oct 2024
DOI:
https://doi.org/10.5089/9798400291630.001
ISBN:
9798400291630
ISSN:
1018-5941
Pages:
44
Keywords:
International macroeconomics; inflation; metals; production networks; supply shocks.; inflation dynamics; metal shock; metals price shock; production network model; price shock; core CPI inflation; GDP deflator; Metal prices; Supply shocks; Global
Legal-disclaimer:
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.
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We examine the role of metals as economic inputs by using a production network model, calibrated for various countries using input-output (I-O) tables. Empirically, we employ local projections to study how metal shocks influence inflation, testing country-level heterogeneity in the sensitivity to these shocks. Our findings indicate that metals price shocks have significant and persistent effects on core and headline inflation, with particularly pronounced effects on countries that are highly exposed to metals in their production networks. This is in contrasts to oil supply shocks, which predominantly affect headline inflation. A shift of the global economy towards a higher relative metals intensity due to the energy transition could lead to commodity price shocks increasingly influencing core rather than headline inflation. This could make commodity price shocks less visible on impact but more persistent. Central banks should consider this shift when assessing inflation dynamics and risks.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund