Shipping Costs and Inflation

The Covid-19 pandemic has disrupted global supply chains, leading to shipment delays and soaring shipping costs. We study the impact of global shipping costs-measured by the Baltic Dry Index (BDI)-on domestic prices for a large panel of countries during the period 1992-2021. We find that spikes in the BDI are followed by sizable and statistically signif-icant increases in import prices, PPI, headline, and core inflation, as well as inflation expec-tations. The impact is similar in magnitude but more persistent than for shocks to global oil and food prices. The effects are more muted in countries where imports make up a smaller share of domestic consumption, and those with inflation targetin…