Journal article

Imperfect information, composition of demand shocks, and the flattening of the Phillips curve

Abstract:: We study how global supply chain disruptions affect monetary policy transmission. Post-pandemic evidence indicates surging transportation costs, goods-market imbalances, and rising prices. We develop a model in which logistical bottlenecks (upstream slack coexisting with downstream shortages) steepen the aggregate supply curve. This convexity amplifies price responses to monetary policy while dampening output effects. Threshold VAR and Local Projection estimates are consistent with this mechanism: during disruptions, contractionary policy reduces prices more at smaller output cost, easing the stabilization trade-off.

Publication status:: Accepted

Peer review status:: Peer reviewed

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APA Style

Bai, X., Fernandez-Villaverde, J., Li, Y., & Zanetti, F. (2026). Imperfect information, composition of demand shocks, and the flattening of the Phillips curve. Oxford Economic Papers.

MLA Style

Bai, X, et al. “Imperfect Information, Composition of Demand Shocks, and the Flattening of the Phillips Curve.” Oxford Economic Papers, 2026.

Chicago Style

Bai, X, J Fernandez-Villaverde, Y Li, and F Zanetti. 2026. “Imperfect Information, Composition of Demand Shocks, and the Flattening of the Phillips Curve.” Oxford Economic Papers.
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Authors

+ Bai, X More by this author

Role:: Author

+ Fernandez-Villaverde, J More by this author

Role:: Author

+ Li, Y More by this author

Role:: Author

+ Zanetti, F More by this author

Institution:: University of Oxford
Division:: SSD
Department:: Economics
Oxford college:: Wadham College
Role:: Author

Publisher:: Oxford University Press
Journal:: Oxford Economic Papers More from this journal
Acceptance date:: 2026-05-01
EISSN:: 1464-3812
ISSN:: 0030-7653

Language:: English
Keywords:: monetary policy

supply chain disruption

state dependence

convex supply curve

inflation
Pubs id:: 2423151
Local pid:: pubs:2423151
Deposit date:: 2026-05-24
ARK identifier:: ark:/29072/ora_e9472d1ce6af4b2394c04e91c907dd4b

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