A SHARED CRISIS OR ASYMMETRIC OUTCOMES? A Quantitative Analysis of Inflation Dynamics in the European Union Following Russia´s Invasion of Ukraine

Abstract

The sharp increase in inflation across the European Union following Russia´s invasion of Ukraine in February 2022 triggered an economic challenge. While the energy price shock affected all EU member states, differences in pre-existing dependence on Russian gas may have led to asymmetric inflation outcomes. Previous research has focused on the role of energy intensity and economic structure in explaining inflation differentials, however less attention has been paid to geopolitical energy dependence. This thesis therefore examines whether EU member states with higher dependence on Russian gas experienced relatively stronger inflationary effects following the invasion. Building on the theory of cost-push inflation, it is assumed that reliance on Russian gas increased vulnerability to supply disruptions and price uncertainty, thereby amplifying inflationary effects. The analysis applies a quantitative differences-in-differences design using monthly Harmonised Index of Consumer Prices (HICP) data combined with annual data on gas imports and gas consumption for all 27 EU member states during 2021—2023, showing stronger associations in gas-dependent countries. These findings remain robust when controlling for energy intensity and industrial share and the thesis concludes by discussing implications and direction for future research.