(AGENPARL) - Roma, 20 Marzo 2026 -
The post-pandemic inflation surge is often attributed to pent-up demand andopportunistic price hikes. In fact, it is better explained by the effects of theeconomy’s production network and “state-dependent” pricing, where firmschange prices optimally when the reward justifies the effort. Firms are tightlylinked through supply chains so a surge in prices upstream can triggersimultaneous repricing by many layers of firms downstream, fuelling broad-based inflation. Unlike standard models, our euro area model includes theseeffects and successfully reproduces the post-pandemic inflation surge andfaster repricing. This implies analysis of such effects is indispensable formonetary policy(AGENPARL)