Alfonso Merendino
- 12 May 2026
- WORKING PAPER SERIES - No. 3230Details
- Abstract
- Using U.S. and Euro area data, we document that (i) the pass-through of energy prices to inflation is state-dependent - stronger when supply chain uncertainty is elevated – and (ii) in such states, energy prices become more informative about logistical conditions. We develop a model in which firms combine energy and a specialized input transported through a capacity-constrained transportation network. When congestion binds, energy remains available in local markets at a premium, whereas the specialized input is subject to delivery delays. Because energy prices reflect both raw energy shocks and transportation conditions, firms treat them as noisy signals of supply disruptions and update beliefs through Bayesian learning. This signal-extraction channel increases perceived marginal costs, generating an uncertainty wedge that amplifies and propagates energy shocks. Within a general-equilibrium New Keynesian model, the mechanism raises the impact elasticity and the persistence of inflation in response to transitory energy shocks. This challenges the conventional monetary policy prescription to “look through” supply disturbances.
- JEL Code
- E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
D83 : Microeconomics→Information, Knowledge, and Uncertainty→Search, Learning, Information and Knowledge, Communication, Belief
- 12 May 2026
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 3, 2026Details
- Abstract
- China’s industrial rise is a key external force influencing euro area trade, production and prices by reducing costs for euro area companies, via intermediate inputs, and increasing competitive pressures in European and global markets. Econometric analysis shows that the increase in the exposure of the euro area to intermediate goods imports from China has been positively associated with industrial production growth, whereas the increase in imports of final goods from China has tended to weigh on production. Model-based simulations can capture the increase in competitive pressures from China via sector-specific productivity shocks. The simulations suggest that, at the aggregate level, EU GDP increases in the short term, driven by positive income effects owing to cheaper imported goods and by reduced production costs resulting from cheaper imported inputs, while inflation declines.
- JEL Code
- D24 : Microeconomics→Production and Organizations→Production, Cost, Capital, Capital, Total Factor, and Multifactor Productivity, Capacity
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
F12 : International Economics→Trade→Models of Trade with Imperfect Competition and Scale Economies, Fragmentation
F13 : International Economics→Trade→Trade Policy, International Trade Organizations
F14 : International Economics→Trade→Empirical Studies of Trade
F40 : International Economics→Macroeconomic Aspects of International Trade and Finance→General
L25 : Industrial Organization→Firm Objectives, Organization, and Behavior→Firm Performance: Size, Diversification, and Scope
L60 : Industrial Organization→Industry Studies: Manufacturing→General