Pandemic Inflation in the US and the Euro Area: Demand or Supply?

This thesis studies the drivers of pandemic inflation in the United States and the Euro Area over the period 2018M1-2024M6. The empirical strategy estimates parallel monthly structural VAR models and identifies demand, adverse supply, energy, and monetary tightening shocks using sign restrictions. The baseline identification uses contemporaneous restrictions, following the classical sign-restriction tradition, and deliberately keeps the model parsimonious because the sample contains only seventy-seven transformed monthly observations. Global supply-chain pressure, measured by GSCPI, and acute-pandemic dummy variables enter as exogenous controls. The central objects of interest are impulse responses, forecast error variance decompositions, historical decompositions, and posterior probabilities comparing US and Euro Area inflation drivers. The results indicate that both economies experienced inflation dynamics that cannot be assigned to a single structural source. In the baseline FEVD, the Euro Area demand share exceeds the US demand share for both headline and core inflation at all reported horizons, while the energy comparison remains close to the neutral benchmark. This means that the structural model does not confirm the simple narrative that the United States was more demand-driven and the Euro Area more energy-driven. A substantial residual component remains in the FEVD, suggesting that fiscal shocks, expectations, labour-supply disturbances, and pandemic-specific uncertainty may matter but are not separately identified in the six-variable baseline. The thesis therefore provides a qualified answer to the question in the title: the descriptive evidence and historical context suggest regional differences, but a short-sample sign-restricted SVAR gives limited probabilistic support for a sharp cross-region ranking.