Early on during the COVID-19 crisis, several macroeconomists including Martin Eichenbaum and Jason Furman recognised that the global pandemic was imposing an unfamiliar mix of shocks. It was not simply that the pandemic lowered aggregate supply by making workers ill, or that mobility restrictions reduced demand from private consumption. Instead, dynamic interactions between the supply and demand disturbances were causing discontinuous shifts. 5 The current spate of inflationary shocks, including those catalysed by geopolitical events in February, has also highlighted that the supply side can be pertinent for business cycle gyrations, alongside the more commonly-recognised aggregate demand fluctuations. Supply-side factors can no longer be regarded as low-frequency phenomena relevant only as determinants of long-term growth. Rather, in a globalised world, shocks in one jurisdiction can lead to gridlock in production via supply chain linkages, leading to short-term effects on growth and inflation in other economies. These coordination failures within and across industries, are most relevant today. 6 Second, once the nature of the shock is properly characterised, the appropriate policy response needs to be brought to bear. Policies clearly need to be carefully fashioned. Traditional fiscal pump-priming was not appropriate for dealing with strict lockdowns during the pandemic, while tighter monetary policy would not directly alleviate supplyside, cost-push, inflationary pressures. Complicating the picture, when multiple types of shocks are in play, coordination across different policy instruments becomes imperative.

Fiscal support to preserve real incomes in a supply-constrained economy during a global pandemic must be subsequently followed by timely withdrawal of stimulus and  monetary tightening in the recovery phase to anticipate subsequent inflationary consequences. 7 Researchers can add value to the policy discourse by supplying clearly articulated frameworks that map optimal policy responses to specific shocks and provide guidance on their coordination. Flexibility must also be accorded for individual policy responses across countries reflecting their unique circumstances. 8 The third strand of issues stresses the labour market considerations that have emerged, through the prism of both the micro and macro perspective. During the COVID19 shock, preventing scarring in the labour market was the key concern, inducing policymakers to experiment with innovative policy designs to preserve existing job matches while facilitating some necessary sectoral reallocation over time. Fast forward to today, supply shocks from the Russia-Ukraine crisis can interact with tight labour markets to amplify inflationary pressures. So,” Whither the flat Phillips Curve?” Has the near-term inflation unemployment trade off worsened and will wages and prices start to drive each other higher in a recursive loop. 9 Given the key role of the labour market in recent shocks, the ability to track labour market outcomes in real-time is of substantial value. At the height of the pandemic, Steve Davis, Nick Bloom, and Raj Chetty among others constructed valuable new survey-based frameworks to make labour market data available at higher frequency, and more promptly than official sources.