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

Research output: Contribution to journalArticleResearchpeer review

Authors

  • Lena Dräger
  • Klaus Gründler
  • Niklas Potrafke

Research Organisations

External Research Organisations

  • Munich Society for the Promotion of Economic Research - CESifo GmbH
  • Kiel Institute for the World Economy
  • Ludwig-Maximilians-Universität München (LMU)
  • University of Kassel
  • Ifo Institute - Leibniz Institute for Economic Research at the University of Munich
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Details

Original languageEnglish
Article number104029
Number of pages16
JournalJournal of international economics
Volume153
Early online date2 Dec 2024
Publication statusPublished - Jan 2025

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.

Keywords

    2022 Russian invasion of Ukraine, Belief formation, Economic experts, Inflation expectations, Natural experiment, Supply-side shock, Survey

ASJC Scopus subject areas

Cite this

Political shocks and inflation expectations: Evidence from the 2022 Russian invasion of Ukraine. / Dräger, Lena; Gründler, Klaus; Potrafke, Niklas.
In: Journal of international economics, Vol. 153, 104029, 01.2025.

Research output: Contribution to journalArticleResearchpeer review

Dräger L, Gründler K, Potrafke N. Political shocks and inflation expectations: Evidence from the 2022 Russian invasion of Ukraine. Journal of international economics. 2025 Jan;153:104029. Epub 2024 Dec 2. doi: 10.1016/j.jinteco.2024.104029
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