Working paper

State dependence of monetary policy during global supply chain disruptions

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:: Published

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APA Style

Bai, X., Fernández-Villaverde, J., Li, Y., & Zanetti, F. (2026). State dependence of monetary policy during global supply chain disruptions. University of Oxford.

MLA Style

Bai, X, et al. “State Dependence of Monetary Policy during Global Supply Chain Disruptions.” University of Oxford, 2026. Department of Economics Discussion Paper Series.

Chicago Style

Bai, X, J Fernández-Villaverde, Y Li, and F Zanetti. 2026. “State Dependence of Monetary Policy during Global Supply Chain Disruptions.” Department of Economics Discussion Paper Series. University of Oxford.
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Files:: Bai_et_al_2026_State_dependence_of.pdf

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Publication website:: https://economics.web.ox.ac.uk/publication/2420109/ora-hyrax

Authors

+ Bai, X More by this author

Role:: Author

+ Fernández-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:: University of Oxford
Series:: Department of Economics Discussion Paper Series
Place of publication:: Oxford, UK
Publication date:: 2026-05-15
Paper number:: 1117

Language:: English
Keywords:: convex supply curve

state dependence

supply chain disruption

inflation

monetary policy
Pubs id:: 2420109
Local pid:: pubs:2420109
Deposit date:: 2026-05-15
ARK identifier:: ark:/29072/ora_ee625fda048b4d619785a283589b93ba

Terms of use

Copyright holder:: Bai et al.
Copyright date:: 2026
Rights statement:: © 2026 The Author(s).

Licence:: Terms and Conditions of Use for Oxford University Research Archive

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