Original scientific paper

https://doi.org/10.3326/pse.50.1.2

Different strokes for different folks: untangling supply and demand shocks using survey-data to assess sectoral inflationary pressures in Croatia

Frane Banić orcid.org/0000-0002-1672-931X ; Croatian National Bank, Zagreb, Croatia *
Guzmán González-Torres orcid.org/0000-0003-3143-1172 ; Bank of Italy

* Corresponding author.

Abstract

While inflation has moderated across most of the euro area since its post-pandemic peak, some countries still face above-average price pressures. In Croatia, inflation has slowed but remains persistent, raising questions about its underlying origins. This paper analyses recent inflationary pressures in Croatia, using firmlevel survey data on production constraints and capacity utilization to untangle supply and demand factors in services and manufacturing, considering sectoral inflation divergence. Unlike traditional approaches, our sectoral output gap captures both supply and demand side drivers of inflationary pressures. Findings show that post-pandemic inflation was mainly driven by supply factors, labour and intermediate input shortages, while ongoing demand pressures, especially in services, continue to fuel inflation. By examining structural and cyclical factors we offer new insights into how inflation behaves in smaller euro area economies, which could help policymakers refine their tools for managing inflation since onesize- fits-all solutions may fall short.

Keywords

sector-specific output gap; survey-data; inflation divergence; structural Phillips curve; Croatia

Hrčak ID:

345527

URI

https://hrcak.srce.hr/345527

Publication date:

18.3.2026.

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