Global supply chain disruptions were a major driver of the inflation surge in the pandemic era. In this paper, I investigate how key macroeconomic indicators shape inflation risk in Mexico and whether global supply chain pressures affect it. Using a quantile augmented Phillips Curve, I show that global supply chain pressures shift the entire 1-year-ahead predictive distribution of inflation to the right, having a higher effect on upper percentiles. Then, I ask whether monetary policy can manage inflation risk. Using high-frequency identified monetary policy shocks, I find a non-linear effect across the predicted inflation distribution. Policy shocks can curb right-tail inflation risks but have a small effect on the lower part of the distribution. My findings suggest that policymakers have room to maneuver to reduce tail risks, even when these are driven by external factors, such as global supply chain disruptions.
Sebastian Medina-Espidio (Wed,) studied this question.