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Reposted by Empirical Macroeconomics Policy Center of Texas

Yuriy Gorodnichenko @ygorodnichenko.bsky.social · 27d

Inflation ⬆️ & Employment ⬇️ → Stagflation

A difficult situation for the Fed. Cut interest rates now → risk of rising inflation ⬆️

More here: "Inflation, Expectations and Monetary Policy: What Have We Learned and to What End?" with Oli Coibion @empctmacrotx.bsky.social, shorturl.at/2fmOD

#EconSky

US consumer inflation heats up; weekly jobless claims near four-year high

U.S. consumer prices increased by the most in seven months in August amid higher costs for housing and food, but a surge in first-time applications for unemployment aid last week kept the Federal Reserve on track to cut interest rates next Wednesday.

www.reuters.com

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Empirical Macroeconomics Policy Center of Texas @empctmacrotx.bsky.social · Aug 29

Read the full blog post here: sites.utexas.edu/macro/2025/0...

Empirical Macroeconomics Policy Center of Texas @empctmacrotx.bsky.social · Aug 29

The authors emphasize that although America is further away from the battlegrounds, history shows that American consumers do react to wars overseas, calling for stabilization by policymakers and central banks, especially by anchoring expectations.

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Empirical Macroeconomics Policy Center of Texas @empctmacrotx.bsky.social · Aug 29

Importantly, these views also concern people's personal situation and not just their general economic outlook.

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Empirical Macroeconomics Policy Center of Texas @empctmacrotx.bsky.social · Aug 29

Though apparently far away, wars still transcend into the expectations of households and consumers, progressively worsening their outlook as wars drag on as shows European survey data.

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Empirical Macroeconomics Policy Center of Texas @empctmacrotx.bsky.social · Aug 29

How Wars in Foreign Countries Influence Inflation and Expectations

That is what Olivier Coibion and Yuriy Gorodnichenko explore in our most recent blog post "When Foreign Wars Abroad Hit Wallets at Home".

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Empirical Macroeconomics Policy Center of Texas @empctmacrotx.bsky.social · Aug 25

New working paper:

The Dynamics of Technology Transfer: Multinational Investment in China and Rising Global Competition

by @jaedochoi.bsky.social, George Cui, Younghun Shim & Yongseok Shin.

Link to the paper as well as other working papers of our center: sites.utexas.edu/macro/resear...

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Empirical Macroeconomics Policy Center of Texas @empctmacrotx.bsky.social · Aug 15

New (updated) working paper:

The Inflation Attention Threshold and Inflation Surges by
@pfaeutiecon.bsky.social
.

Link to the paper as well as other working papers of our center:
sites.utexas.edu/macro/resear...

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Empirical Macroeconomics Policy Center of Texas @empctmacrotx.bsky.social · Jul 15

More details in the blog post: sites.utexas.edu/macro/2025/0...

and even more details in the paper: academic.oup.com/restud/advan...

How News about the US Economy Drives Global Financial Conditions

sites.utexas.edu

Empirical Macroeconomics Policy Center of Texas @empctmacrotx.bsky.social · Jul 15

While US macroeconomic announcements have large effects on foreign stock markets, the reverse is not true. Foreign economic news releases have little to no effects on US markets.

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Empirical Macroeconomics Policy Center of Texas @empctmacrotx.bsky.social · Jul 15

US monetary policy has a stabilizing role after US macroeconomic news releases.

When bad news about the US economy becomes available, markets expect Fed to lower interest rates, which partially offsets the decline in stock markets and thus stabilizes asset markets and economy.

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Empirical Macroeconomics Policy Center of Texas @empctmacrotx.bsky.social · Jul 15

These findings suggest that investors are more confident in holding riskier assets when the US economy is doing well.

Flip side: bad news about the US economy can lead to a global stock market panic

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Empirical Macroeconomics Policy Center of Texas @empctmacrotx.bsky.social · Jul 15

Why is it that global stock prices respond so much to surprises about US macroeconomic data releases?

➡️ global stock prices rise after US macroeconomic news releases
➡️investors’ perceived risk and uncertainty falls
➡️ prices of relatively safe assets also fall

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Empirical Macroeconomics Policy Center of Texas @empctmacrotx.bsky.social · Jul 15

How does news about the US economy affect the rest of the world?

➡️ after US macroeconomic news releases, global stock prices respond immediately and in a synchronized way.
➡️ effects are large: Foreign countries’ stock prices respond with magnitudes similar to US stock market.

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Empirical Macroeconomics Policy Center of Texas @empctmacrotx.bsky.social · Jul 15

How News about the US Economy Drives Global Financial Conditions

New blog post by Chris Boehm and @kronerniklas.bsky.social (UT graduate @utaustinecon.bsky.social 🤟) based on paper recently published in @reveconstudies.bsky.social.

Short summary below ⬇️

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Empirical Macroeconomics Policy Center of Texas @empctmacrotx.bsky.social · Jun 4

Much more details, including a discussion of the policy implications can be found in the blog post:
sites.utexas.edu/macro/2025/0...

Or in the full working paper: utexas.app.box.com/s/ht0ddytxfx...

Thank you for reading!
@utaustinecon.bsky.social

How French Firms Navigated the Inflation Surge: Lessons for Expectations and Decision-MakingBlueskyEmailTwitter

sites.utexas.edu

Empirical Macroeconomics Policy Center of Texas @empctmacrotx.bsky.social · Jun 4

This is consistent with models where wage contracts are short-lived and expectations beyond the contract horizon are irrelevant (as @ivanwerning.bsky.social 's work highlights)

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Empirical Macroeconomics Policy Center of Texas @empctmacrotx.bsky.social · Jun 4

Only short-term expectations (and inflation perceptions) are meaningfully correlated w/ expected wage growth. Long-run inflation expectations have essentially no predictive power.

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Empirical Macroeconomics Policy Center of Texas @empctmacrotx.bsky.social · Jun 4

As inflation began rising in 2022, firms initially underreacted: short-term expectations rose more slowly than actual inflation. This gave way to persistent overshooting—firms expected more inflation than actually materialized, especially in the disinflation phase in 2023–2024.

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Empirical Macroeconomics Policy Center of Texas @empctmacrotx.bsky.social · Jun 4

How French Firms Navigated the Inflation Surge: Lessons for Expectations and Decision-Making

New blog post by Oli Coibion, @erwan-gautier.bsky.social and Frédérique Savignac.

Short summary follows ⬇️

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Empirical Macroeconomics Policy Center of Texas @empctmacrotx.bsky.social · Jun 2

Now also out as a EMPCT working paper!

Link: sites.utexas.edu/macro/resear...

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Empirical Macroeconomics Policy Center of Texas @empctmacrotx.bsky.social · Jun 2

Inflation, Expectations and Monetary Policy: What Have We Learned and to What End?

New paper by Oli Coibion and @ygorodnichenko.bsky.social sheds new light on the recent inflation period and looks ahead.

NBER @nber.org · Jun 1

Unanchored inflation expectations make us very susceptible to another surge in inflation, from Olivier Coibion and @ygorodnichenko.bsky.social https://www.nber.org/papers/w33858

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Reposted by Empirical Macroeconomics Policy Center of Texas

Oliver Pfäuti @pfaeutiecon.bsky.social · May 23

It took a while, but we finally have a new (heavily revised) version out:

nber.org/papers/w32305

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Empirical Macroeconomics Policy Center of Texas @empctmacrotx.bsky.social · May 23

Want to know more about firms' inflation expectations during the recent inflation surge? And how do their expectations correlate w/ wage expectations and firms' price setting?

Check out the new EMPCT working paper by @erwan-gautier.bsky.social, Savignac & Coibion: sites.utexas.edu/macro/resear...

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Reposted by Empirical Macroeconomics Policy Center of Texas

Empirical Macroeconomics Policy Center of Texas @empctmacrotx.bsky.social · May 22

New working paper on French firms' inflation and wage expectations by Oli Coibion and coauthors!

NBER @nber.org · May 20

A survey of French firm's inflation expectations that predate inflation spikes provides evidence on the anchoring of expectations during an inflation surge and the relevance of expectations for firms' decisions, from Gautier, Savignac, and Coibion https://www.nber.org/papers/w33799

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