Inflation in the EU. How sectoral price shocks ripple domestically and across borders in core and periphery countries

The return of inflation in Western economies has reignited the debate over its causes, bringing sector-specific shocks and supply chain bottlenecks to the forefront. Building on inflation studies using the Leontief price model, we develop a method to measure EU member states’ vulnerability to sectoral price shocks. Using international input–output data, we identify which sectors have the greatest impact on overall inflation and analyze how price shocks spread across borders. Our findings reveal two critical asymmetries. First, peripheral countries are more exposed to shocks originating in the EU core than vice versa. Second, all EU member states are considerably exposed to price shocks originating from non-EU countries, namely Russia and China. These strategic dependencies pose challenges for price stability and require targeted industrial policy interventions going beyond conventional monetary policy.