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Shockflation in the EU: sectoral shocks, cost-push inflation and structural asymmetries in core and periphery countries

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Listed:
  • Vicente Ferreira
  • Joao Pedro Ferreira
  • Dario Guarascio
  • Francesco Zezza

Abstract

We estimate how energy shocks affect the functional distribution of income. Using structural vector autoregressions identified with the oil supply news instrument proposed by Kanzig(2021), we find that an increase in oil prices leads to a substantial and long-lasting decline in the wage share. Real aggregate wage income is significantly impacted, with a considerable part of this decline stemming from distributive dynamics. We also investigate possible asymmetries in the response to oil supply shocks, finding that the wage share is more sensitive to negative shocks than to positive ones. This suggests that wage earners lose from oil price hikes more than they benefit from declines.

Suggested Citation

  • Vicente Ferreira & Joao Pedro Ferreira & Dario Guarascio & Francesco Zezza, 2024. "Shockflation in the EU: sectoral shocks, cost-push inflation and structural asymmetries in core and periphery countries," LEM Papers Series 2024/31, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    • Handle: RePEc:ssa:lemwps:2024/31
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    More about this item

    Keywords

    Inflation; Supply chain shocks; Input-Output; Core-periphery;
    All these keywords.

    JEL classification:

    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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