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Political shocks and inflation expectations: Evidence from the 2022 Russian invasion of Ukraine

Author

Listed:
  • Dräger, Lena
  • Gründler, Klaus
  • Potrafke, Niklas

Abstract

How do global supply-side shocks influence macroeconomic expectations? We exploit the 2022 Russian invasion of Ukraine as a natural experiment to identify the effect of a global political shock, which translated into a momentous supply-side shock, on inflation expectations. Collecting a unique survey among tenured economics professors in Germany, we find sizable effects on inflation expectations and monetary policy recommendations. A comparison with a representative sample of households shows that experts’ expectations adjust faster and to a larger degree to the shock. Text analyses on open-ended questions reveal that the effects are caused by supply-side models underlying experts’ formation of expectations.

Suggested Citation

  • Dräger, Lena & Gründler, Klaus & Potrafke, Niklas, 2025. "Political shocks and inflation expectations: Evidence from the 2022 Russian invasion of Ukraine," Journal of International Economics, Elsevier, vol. 153(C).
    • Handle: RePEc:eee:inecon:v:153:y:2025:i:c:s0022199624001569
    DOI: 10.1016/j.jinteco.2024.104029
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    Keywords

    Inflation expectations; Supply-side shock; Belief formation; Natural experiment; 2022 Russian invasion of Ukraine; Survey; Economic experts;
    All these keywords.

    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E71 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on the Macro Economy
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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