"How did past major pandemics affect inflation dynamics? This column estimates the long-run effects of pandemics on trend inflation in Europe using historical data since the 14th century. We find that, following a pandemic event, trend inflation falls steadily below its initial level for nearly a decade. This long-run depressing effect is also observed in major individual"

"Our empirical approach closely follows JST, who use a local projection model to study the effects of pandemics on the natural rate of interest. Our main contribution is that we focus instead on the impact of pandemics on trend inflation. As in JST, we include a dummy variable that equals 1 in years when a major pandemic ends. To control for other factors that might influence the behaviour of trend inflation, we include global GDP growth and a dummy accounting for wars resulting in more than 20,000 deaths (these data are all taken from Schmelzing 2020). Moreover, we add ten lags of these two control variables and of trend inflation."