Work

The aggregate effects of global and local supply chain disruptions: 2020–2022

Year: 2023

Type: article

Abstract: We study the aggregate effects of supply-chain disruptions in the post-pandemic period in a heterogeneous-firm, general equilibrium model with input-output linkages and a rich set of supply chain frictions: uncertain shipping delays, fixed order costs, and storage costs. Firms optimally hold inventories that depend on the source of supply, domestic or imported. Increases in shipping times are contractionary, raise prices, and increase stockouts, particularly for goods intensive in delayed inputs. These effects are larger when inventories are already at low levels. We fit the model to the U.S. and global economies from 2020 to 2022 and estimate large aggregate effects of supply disruptions. Our model predicts that the boost in output from reducing delays will be smaller than the contraction from the waning effects of stimulus.

Source: Journal of International Economics

DOI: 10.1016/j.jinteco.2023.103788

Authors: George Alessandria, Shafaat Yar Khan, Armen Khederlarian, Carter Mix, Kim J. Ruhl

Institutions: University of Rochester, World Bank, University of Connecticut, Federal Reserve Board of Governors, University of Wisconsin–Madison

Language: English

Topic: COVID-19 Pandemic Impacts

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Decent work and economic growth, Industry, innovation and infrastructure

Open Access status: hybrid

Estimated APC paid: $3,280