International Finance Discussion Papers (IFDP)
May 2025
Measuring Shortages since 1900
Dario Caldara, Matteo Iacoviello, and David Yu
Abstract:
This paper introduces a monthly shortage index spanning 1900 to the present, constructed from 25 million newspaper articles. The index captures shortages across industry, labor, food, and energy, and spikes during economic crises and wars. We validate the index and show that it provides information beyond traditional macroeconomic indicators. Using predictive regressions, we find that shortages are associated with persistently high inflation and lower economic activity. A structural VAR model reveals that, compared to a traditional supply shock, surprise movements in shortages produce less inflation relative to their GDP impact, suggesting that shortages are associated with constraints on price adjustment that limit inflation but magnify the decline in real activity. We also show that post-pandemic shortages and inflation were primarily driven by supply forces, with demand factors playing a less important role.
Keywords: Inflation, Predictive Regressions, Shortages, Structural VAR Model, Textual Analysis
DOI: https://doi.org/10.17016/IFDP.2025.1407
PDF: Full Paper
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