Commodity Price Shocks, Supply Chain Disruptions and U.S. Inflation

This paper analyzes the impact of commodity price shocks and global supply chain disruptions on U.S. inflation. Since the inflationary effect of particular commodities is time-varying, our main contribution is to construct a Cost-Push Commodity factor through a genetic algorithm which recursively selects the commodity prices that best explain U.S. inflation. When this factor is included into a Structural Vector Autoregressive model, average and time-varying impulse response functions show how the U.S. inflation rate has responded to commodity price shocks and supply chain disruptions over the sample period, including COVID-19 pandemic. Important policy implications can be derived from these results.