Macroeconomics Seminar (Extra) - Kim Ruhl

Title: The Aggregate Effects of Global and Local Supply Chain Disruptions: 2020–2022

Read the paper here

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 2020–2022 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.