Inflation persistence is central to monetary policy design because it governs the output costs of disinflation and the speed at which shocks fade. In climate-vulnerable economies, supply disruptions increasingly arise from floods, droughts, and heat stress—often transmitting quickly into food and energy prices. This study develops an empirically replicable framework to quantify how climate-related supply shocks affect the persistence and pass-through of inflation in Pakistan using high-frequency price information for food and energy items combined with disaster intensity and weather anomaly indicators. Methods integrate (i) (i) inflation decomposition into food, energy, and core components; (ii) persistence estimation via autoregressive and fractional-integration specifications; and (iii) local projections to trace dynamic responses to climate shocks and energy-price disturbances. Evidence synthesised from the peer-reviewed climate–inflation literature and Pakistan’s recent inflation dynamics indicates that climate shocks primarily increase short-horizon persistence through food inflation, while energy shocks propagate more strongly into non-food components when exchange-rate and administered-price regimes amplify second-round effects. Comparative analyses across event windows (flood vs. drought episodes) and price groups (perishables vs. non-perishables; fuels vs. electricity) highlight policy-relevant heterogeneity. The findings support state-contingent monetary–fiscal coordination and targeted supply-side resilience to reduce inflation persistence under rising climate volatility.
Aneel Salman (Sat,) studied this question.