Authors: Viral V. Acharya, Matteo Crosignani, Tim Eisert, and Christian Eufinger
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Staff Reports
How Do Supply Shocks to Inflation Generalize? Evidence From the Pandemic Era in Europe
Number 1164
August 2025
August 2025
JEL classification: E31, E58, D84, L11
We document how the interaction of supply chain pressures, elevated household inflation expectations, and firm pricing power contributed to the pandemic-era surge in consumer price inflation in the euro area. Initially, supply chain disruptions raised inflation, particularly in manufacturing, through a cost-push channel, while also elevating inflation expectations. In turn, higher inflation expectations appear to have lowered the price elasticity of consumer demand and strengthened firms’ pricing power, enabling even firms in service sectors that were initially unaffected by supply constraints to raise markups. Through this expectations mechanism, localized inflation in sectors sensitive to supply-side shocks generalized into broad-based inflation.
Author Disclosure Statement(s)
Viral Acharya
I declare that I do not have relevant or material financial interests that relate to the research described in the paper titled “How Do Supply Shocks to Inflation Generalize? Evidence From the Pandemic Era in Europe.”
Matteo Crosignani
I declare that I do not have relevant or material financial interests that relate to the research described in the paper titled “How Do Supply Shocks to Inflation Generalize? Evidence From the Pandemic Era in Europe.”
Tim Eisert
I declare that I do not have relevant or material financial interests that relate to the research described in the paper titled “How Do Supply Shocks to Inflation Generalize? Evidence From the Pandemic Era in Europe.”
Christian Eufinger
I declare that I do not have relevant or material financial interests that relate to the research described in the paper titled “How Do Supply Shocks to Inflation Generalize? Evidence From the Pandemic Era in Europe.”
I declare that I do not have relevant or material financial interests that relate to the research described in the paper titled “How Do Supply Shocks to Inflation Generalize? Evidence From the Pandemic Era in Europe.”
Matteo Crosignani
I declare that I do not have relevant or material financial interests that relate to the research described in the paper titled “How Do Supply Shocks to Inflation Generalize? Evidence From the Pandemic Era in Europe.”
Tim Eisert
I declare that I do not have relevant or material financial interests that relate to the research described in the paper titled “How Do Supply Shocks to Inflation Generalize? Evidence From the Pandemic Era in Europe.”
Christian Eufinger
I declare that I do not have relevant or material financial interests that relate to the research described in the paper titled “How Do Supply Shocks to Inflation Generalize? Evidence From the Pandemic Era in Europe.”
Suggested Citation:
Acharya, Viral V., Matteo Crosignani, Tim Eisert, and Christian Eufinger. 2025. “How Do Supply Shocks to Inflation Generalize? Evidence From the Pandemic Era in Europe.” Federal Reserve Bank of New York Staff Reports, no. 1164, August. https://doi.org/10.59576/sr.1164
Acharya, Viral V., Matteo Crosignani, Tim Eisert, and Christian Eufinger. 2025. “How Do Supply Shocks to Inflation Generalize? Evidence From the Pandemic Era in Europe.” Federal Reserve Bank of New York Staff Reports, no. 1164, August. https://doi.org/10.59576/sr.1164
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