Discussion paper

DP17259 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 shocks to 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 significant
increases in import prices, PPI, headline, and core inflation, as well as inflation expectations. 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 targeting regimes and better anchored inflation
expectations. The results are robust to several checks, including an instrumental variables
approach in which we instrument changes in shipping costs with an indicator of closures of the
Suez Canal.


Carriere-Swallow, Y, P Deb, D Furceri, D Jiménez and J Ostry (2022), ‘DP17259 Shipping Costs and Inflation‘, CEPR Discussion Paper No. 17259. CEPR Press, Paris & London. https://cepr.org/publications/dp17259