Working Papers
Cutting the Flow: Geopolitical Disruptions to Russian Oil Supply and the Tails of Euro Area Inflation
"Geopolitical disruptions to Russian oil supply do not move euro area inflation uniformly: they reshape its distribution. Using an AI-based news index of oil supply disruptions and a quantile factor-augmented VAR for the 21 member states, I show that a disruption first stretches the upper tail of inflation, raising upside risk on impact, before the median and the lower tail catch up. Responses differ widely across member states and line up with pre-war reliance on Russian energy. The disruptions of 2022--2023 added about two percentage points to euro area inflation at their peak. Size matters: before the invasion, disruptions were disinflationary, and only disruptions of the scale seen in 2022 have effects on inflation that are far more than proportional to their size."