1.0Liberty Street Economicshttps://libertystreeteconomics.newyorkfed.orgtrevordelaneyhttps://libertystreeteconomics.newyorkfed.org/author/trevordelaney-2-2-2-2-2-2-2-2-2-2-2-2-2-2-2-2-2--2/rich600338<blockquote class="wp-embedded-content" data-secret="N9VoBbYvub"><a href="https://libertystreeteconomics.newyorkfed.org/2022/03/drivers-of-inflation-the-new-york-fed-dsge-models-perspective/">Drivers of Inflation: The New York Fed DSGE Model’s Perspective</a></blockquote><iframe sandbox="allow-scripts" security="restricted" src="https://libertystreeteconomics.newyorkfed.org/2022/03/drivers-of-inflation-the-new-york-fed-dsge-models-perspective/embed/#?secret=N9VoBbYvub" width="600" height="338" title="“Drivers of Inflation: The New York Fed DSGE Model’s Perspective” — Liberty Street Economics" data-secret="N9VoBbYvub" frameborder="0" marginwidth="0" marginheight="0" scrolling="no" class="wp-embedded-content"></iframe><script> /*! This file is auto-generated */ !function(d,l){"use strict";l.querySelector&&d.addEventListener&&"undefined"!=typeof URL&&(d.wp=d.wp||{},d.wp.receiveEmbedMessage||(d.wp.receiveEmbedMessage=function(e){var t=e.data;if((t||t.secret||t.message||t.value)&&!/[^a-zA-Z0-9]/.test(t.secret)){for(var s,r,n,a=l.querySelectorAll('iframe[data-secret="'+t.secret+'"]'),o=l.querySelectorAll('blockquote[data-secret="'+t.secret+'"]'),c=new RegExp("^https?:$","i"),i=0;i<o.length;i++)o[i].style.display="none";for(i=0;i<a.length;i++)s=a[i],e.source===s.contentWindow&&(s.removeAttribute("style"),"height"===t.message?(1e3<(r=parseInt(t.value,10))?r=1e3:~~r<200&&(r=200),s.height=r):"link"===t.message&&(r=new URL(s.getAttribute("src")),n=new URL(t.value),c.test(n.protocol))&&n.host===r.host&&l.activeElement===s&&(d.top.location.href=t.value))}},d.addEventListener("message",d.wp.receiveEmbedMessage,!1),l.addEventListener("DOMContentLoaded",function(){for(var e,t,s=l.querySelectorAll("iframe.wp-embedded-content"),r=0;r<s.length;r++)(t=(e=s[r]).getAttribute("data-secret"))||(t=Math.random().toString(36).substring(2,12),e.src+="#?secret="+t,e.setAttribute("data-secret",t)),e.contentWindow.postMessage({message:"ready",secret:t},"*")},!1)))}(window,document); </script> https://libertystreeteconomics.newyorkfed.org/wp-content/uploads/sites/2/2022/02/LSE_2022_drivers-of-inflation_delnegro_460.jpg920576After a sharp decline in the first few months of the COVID-19 pandemic, inflation rebounded in the second half of 2020 and surged through 2021. This post analyzes the drivers of these developments through the lens of the New York Fed DSGE model. Its main finding is that the recent rise in inflation is mostly accounted for by a large cost-push shock that occurred in the second quarter of 2021 and whose inflationary effects persist today. Based on the model’s reading of historical data, this shock is expected to fade gradually over the course of 2022, returning quarterly inflation to close to 2 percent only in mid-2023.