Was the Post-Lockdown Inflation Surge Mainly Supply Driven? by Bill Dupor, Marie Hogan published by Journal of Economic Dynamics & Control (9/2025).
This paper studies PCE price and quantity changes at the disaggregate level using a generalization of Shapiro’s (2024) inflation decomposition method, adapted to account for inflation dynamics. We apply the decomposition to analyze drivers of high inflation in PCE core goods and services between late 2020 and 2022. We benchmark the technique using a classic supply disruption, the 1973 oil embargo and find that 75 percent of non-trend inflation immediately following the embargo was supply-push. In contrast, 33 percent of non-trend inflation was supply-push following the pandemic lockdown. Restricting attention to categories with market-based prices, this falls to 26 percent.
