Sequencing the COVID‐19 Recession in the USA: What Were the Macroeconomic Drivers?

We apply a structural vectorautoregressive analysis to decompose fluctuations in the growth rate of industrial production and inflation precipitated by the COVID‐19 pandemic in the USA into aggregate demand, aggregate supply, and uncertainty shocks. While all three types of shocks contributed to output and inflation dynamics, the surge in economic uncertainty contributed to the decline in output more strongly than aggregate demand or aggregate supply disruptions. In 2021, the decline in uncertainty and adverse aggregate supply shocks emerged to be similarly important in spurring inflation.