Energy Supply Shocks and Inflation in Central and Eastern Europe: Evidence from Bayesian SVARs and Local Projections

Energy price shocks have been the main drivers of inflation in Europe during the last decade. This paper examines cross-country differences in the transmission and magnitude of energy supply shocks in the Visegrád Group countries (Poland, Czechia, Hungary, and Slovakia) over the period 2015–2026. To identify energy-related disturbances and evaluate their macroeconomic effects, we estimate Bayesian Structural Vector Autoregressive (BSVAR) models with sign restrictions and complement the analysis with Local Projections. The results indicate substantial heterogeneity in inflation responses across countries. Oil supply shocks increase inflation by approximately 0.8 percentage points in Czechia and 0.7 percentage points in Hungary, compared with around 0.5 percentage points in Poland and Slovakia. Similar response patterns are observed for gas supply shocks, suggesting that stronger commodity price pass-through contributes to the larger inflationary effects in Czechia and Hungary. The analysis also reveals methodological challenges in identifying the effects of increased LNG imports. Both models indicate LNG-related shocks are highly correlated with pipeline gas supply shocks. In fact, its imports have mitigated energy shortages and reduced price pressures.