Chokepoint shocks deepen output losses and raise producer prices
Chokepoint disruptions cause greater output losses and price pressures than comparable shocks elsewhere, according to Bank for International Settlements (BIS) Bulletin No 138, published October 15, 2026. Substitution limits losses but raises input costs.
Central nodes magnify the damage
Ibrahim Alshehri, Ryan Banerjee, Michael Chui, Anna Maddux, Ko Munakata and Fabrizio Zampolli link chokepoint shocks to larger output losses and higher prices.
A one-standard-deviation disruption at central country-sector nodes is associated with a 50 percent larger decline in global industrial production growth than disruptions elsewhere.
Downstream producer prices rise about 70 basis points within one year; less central disruptions have minimal price effects.
Earnings-call analysis uses large language models to identify shocks and firms' responses.
Substitution cushions quantities but raises costs: Japan cut China's share of rare earth imports from around 80 percent to about 45 percent between 2012 and 2014, paying more for alternatives.
Buffers buy time, not immunity
Across 20 major economies, a simulated 150 percent rise in global electronics trade costs produces short-run GDP losses near 1 percent in most countries and up to 4 percent.
Long-run losses average about 0.3 percent and reach at most 1 percent.
Inventories buy time to substitute, but depleted oil reserves increase inflation risks around the Strait of Hormuz.
Higher margins initially absorb costs, an effect that wanes after four quarters.
The authors retain the case for looking through first-round inflation when expectations remain anchored and second-round risks are low.
Supply repair needs financing
Monetary tightening can impede supply repair by restricting financing, while targeted credit guarantees can support it without boosting demand.
Price subsidies weaken substitution incentives.
Policymakers must distinguish unavoidable relative price adjustments from persistent, generalised inflation.