(1995) Supply-Side Sources of Inflation: Evidence From OECD Countries https://www.federalreserve.gov/econres/ifdp/supply-side-sources-of-inflation-evidence-from

(1995) Supply-Side Sources of Inflation: Evidence From OECD Countries https://www.federalreserve.gov/econres/ifdp/supply-side-sources-of-inflation-evidence-from-oecd-countries.htm https://www.federalreserve.gov/econres/ifdp/supply-side-sour... > We evaluate the merits of the "supply-side" view under which inflation results from sectoral shocks, and compare it with the "classical" view in which inflation results from aggregate factors such as variations in money growth. Using a panel VAR methodology applied to data for 13 GECD countries, we find support for a multi-shock view of inflation: supply-side shocks are statistically significant determinants of inflation, even after taking into account aggregate demand factors. While oil prices are the dominant supply-side influence, other measures such as the skewness of relative price changes are important as well. At short horizons, an innovation to skewness leads to an increase in inflation of 0.5 percentage points. As suggested by the classical view, money growth plays an increasingly important role as the time horizon lengthens. The paper identifies energy (oil in 1995) as the main driver of supply-side inflation which seems reasonable to me because all of our economies use energy, and so changes in the supply of energy would cause shocks across the economy that would result in complex downstream ripple effects. We can watch this play out in Germany today, where they lack sufficient energy to fuel their economy due to the loss of Russian nat gas.