September 22, 2025, Filed Under: Working PaperFirms’ Inflation and Wage Expectations During the Inflation Surge EMPCT Working Paper Series No. 2025-0465 pages | PDF Download | PDF in Browser Citation:Erwan Gautier, Frédérique Savignac, and Olivier Coibion, “Firms’ Inflation and Wage Expectations During the Inflation Surge”, May 2025 AbstractUsing a new survey of French firms’ inflation expectations that predates the inflation spike, we document i) evidence on the anchoring of inflation expectations during the inflation surge, and ii) the relevance of inflation expectations for firms’ decisions. First, we show that inflation expectations under-responded to the initial surge but then persistently overshot actual inflation dynamics. As inflation rose, firms initially perceived inflation to be less persistent than in previous years, an effect that dissipated over time. Second, we find that inflation expectations correlate with firms’ wage and price decisions. One-year expectations matter more than long-term expectations. During the inflation surge, wage and price decisions became increasingly disconnected from inflation expectations. This suggests that the scope for wage-price spirals is likely more limited than one might have expected from the surge in inflation and inflation expectations.
September 22, 2025, Filed Under: Working PaperINFLATION, EXPECTATIONS AND MONETARY POLICY: WHAT HAVE WE LEARNED AND TO WHAT END? EMPCT Working Paper Series No. 2025-0575 pages | PDF Download | PDF in Browser Citation:Coibion, Olivier, Yuriy Gorodnichenko, “Inflation, Expectations and Monetary Policy: What Have We Learned and to What End?”, May 2025 Olivier CoibionUT Austin and NBER Yuriy GorodnichenkoUC Berkeley and NBER Abstract:We review recent research and experiences linking inflation and expectations, emphasizing what has been learned since 2020. One clear lesson is that the inflation expectations of most economic agents have been and remain unanchored. The unanchored nature of inflation expectations, in combination with supply shocks, can explain much of the inflation surge and subsequent disinflation when viewed through the lens of an expectations-augmented Phillips curve, both in the U.S. and abroad. New policy frameworks are unlikely to address this feature of expectations. Only a communication strategy that breaks what we refer to as the “cycle of selective inattention” is likely to be successful, but it is probably already too late to stop the next inflation surge.
September 9, 2025, Filed Under: Working PaperThe Economic Impact of Mass Deportations EMPCT Working Paper Series No. 2025-0969 pages | PDF Download | PDF in Browser Citation: Cravino, Javier, Levchenko, Andrei A., Ortega, Francesc, and Pandalai-Nayar, Nitya, “The Economic Impact of Mass Deportations”, September 2025 Javier CravinoUniversity of MichiganNBER Andrei A. LevchenkoUniversity of Michigan Francesc OrtegaQueens College, CUNY Nitya Pandalai-NayarThe University of Texas at Austin AbstractThis paper quantifies the effects of large-scale deportation policies on wages, prices, andreal incomes in the United States. We impute the legal status for each worker in the AmericanCommunity Survey by combining detailed individual information with group-level visarecords. In 2024, 3% of US workers were unauthorized, but these workers were highly concentratedgeographically, by industry, and by occupation. We then develop a multi-region,multi-sector, multi-occupation quantitative framework with heterogeneous workers to studythe economic impacts of the removal of unauthorized workers. We state analytical results thatrelate region- and occupation-specific real wage and sectoral relative price changes to shocks tothe supply of immigrant workers, observable shares of immigrant workers in occupations andregions, and combinations of structural elasticities. Following the removal of 50% of unauthorizedimmigrants, average native real wages decline in every state, and by 0.3% at the nationallevel. At the same time nationwide native wages in the most immigrant-intensive occupationsrise by up to 3.4% in our baseline calibration. The deportation shock increases the averagewages of immigrants , by 12.2% for the unauthorized workers remaining in the country, and3.2% for the authorized. Consumer prices in the sectors with the highest unauthorized presence– such as Farming – rise by about 1% relative to price of the average consumption basket,while most other sectors experience negligible relative price changes. The overall cost of livingrises by about 0.7% more in the regions hosting the most unauthorized immigrants, comparedto regions with minimal presence of unauthorized workers.
August 25, 2025, Filed Under: Working PaperThe Impact of Geopolitical Risk on Consumer Expectations and Spending EMPCT Working Paper Series No. 2025-0828 pages | PDF Download | PDF in Browser Gorodnichenko, Yuriy; Georgarakos, Dimitris; Kenny, Geoff; and Coibion, Olivier, “The Impact of Geopolitical Risk on Consumer Expectations and Spending”, August 2025 Yuriy Gorodnichenko®UC Berkeley and NBER Dimitris Georgarakos®European Central Bank and CEPR Geoff Kenny®European Central Bank Olivier Coibion®UT Austin and NBER Abstract: Using novel scenario-based survey questions that randomize the expected duration ofthe Russian invasion of Ukraine and Middle East conflict, we examine the causal impact ofgeopolitical risk on consumers’ beliefs about aggregate economic conditions and their ownfinancial outlook. Expecting a longer conflict leads European households to anticipate a worseningof the aggregate economy, with higher inflation, lower economic growth, and lower stock prices.They also perceive negative fiscal implications, anticipating higher government debt and highertaxes. Ultimately, households view the geopolitical conflict as making them worse off financiallyand it leads them to reduce their consumption.
August 22, 2025, Filed Under: Working PaperThe Dynamics of Technology Transfer: Multinational Investment in China and Rising Global Competition EMPCT Working Paper Series No. 2025-0776 pages | PDF Download | PDF in Browser Citation: Choi, Jaedo; Cui, George; Shim, Younghun; and Shin, Yongseok, “The Dynamics of Technology Transfer: Multinational Investment in China and Rising Global Competition”, June 2025 Jaedo ChoiFederal Reserve Board George CuiInternational Monetary Fund Younghun ShimInternational Monetary Fund Yongseok ShinWashington University in St. LouisFederal Reserve Bank of St. Louis AbstractUS multinationals form joint ventures in China for market access and lower labor costs. However,these ventures transfer knowledge to Chinese partners and local firms, increasing futurecompetition from China. While multinationals take into account these spillovers, they don’t accountfor the impact on other US firms, potentially leading to over-investment from a US socialperspective. We establish three novel empirical facts on spillovers and competition effects. First,Chinese parent firms of joint ventures become larger, export more, and grow technologically similarto their US partners. Second, in industries with more joint ventures, even non-participatingChinese firms grow larger and more technologically advanced. Third, US firms in these industriesexperience negative impacts on their size, exports, and innovation. We then develop a two-countrygrowth model with oligopolistic competition and endogenous innovation and joint venture decisions.For the US, joint ventures generate short-run gains that are outweighed by long-run lossesdue to rising competition from China. Large US firms’ profits are higher with joint ventures, atthe expense of small firms’ profits and the real wage. Banning joint ventures from the beginningwould have raised US welfare by 1.2 percent but reduced China’s by 10.6 percent, as Chinese firms’productivity growth is substantially delayed.
August 14, 2025, Filed Under: Working PaperThe Inflation Attention Threshold and Inflation Surges (Revised) EMPCT Working Paper Series No. 2025-0690 pages | PDF Download | PDF in Browser Citation: Oliver Pfäuti, August 2025 AbstractThe recent inflation surge brought inflation back on people’s minds. I quantify when andhow much attention to inflation changes and derive the macroeconomic implications of theseattention changes. I estimate an attention threshold at an inflation rate of 4%, that attentiondoubles when inflation exceeds this threshold, and that supply shocks have stronger and morepersistent effects on inflation in times of high attention. Developing a model featuring theattention threshold, I show that the observed attention changes offer a joint explanation forthe recent inflation surge, its interplay with inflation expectations, and the long last mile ofdisinflation.
March 28, 2025, Filed Under: Working PaperAttention to the Macroeconomy EMPCT Working Paper Series No. 2025-0374 pages | PDF Download | PDF in Browser Citation:Link, Sebastian, Peichl, Andreas, Pfauti, Oliver, Roth, Christopher, Wohlfart, Johannes, “Attention to the Macroeconomy”, March 2025 Sebastian Linkifo Institute – Leibniz Institute for Economic Research at the University of Munich Andreas Peichl ifo Center for Macroeconomics and Surveys Oliver PfäutiThe University of Texas at Austin Christopher RothUniversity of Cologne Johannes WohlfartUniversity of Cologne AbstractWe collect novel measures of households’ and firms’ attention to the economy using open- ended survey questions, fielded during a large shock to inflation, and test the predictions of theories of rational, goal-optimal attention allocation. We find support for several predictions of such theories: attention to the macroeconomy exhibits large and persistent cross-sectional heterogeneity, which is related to agents’ degree of exposure to the economy and measures of information costs; attention to the macroeconomy responds strongly to shocks; more attentive respondents adjust their inflation expectations more frequently during the shock, are more confident in their beliefs, and hold smaller misperceptions about realized inflation. However, at odds with goal-optimality of attention, more attentive agents’ expectations about future inflation deviate more strongly from expert benchmarks. To explain these patterns, we present a model of selective memory, in which attention can be “non-goal-optimal”. In this model, prior experiences shape both attention allocation and belief formation, and attention to other variables can spill over to inflation expectations. We confirm these additional predictions in our data.
March 5, 2025, Filed Under: Working PaperFast and Slow Technological Transitions EMPCT Working Paper Series No. 2025-0274 pages | PDF Download | PDF in Browser Citation:Adão, Rodrigo, Martin Beraja, and Nitya Pandalai-Nayar, “Fast and Slow Technological Transitions”, February 2024 Rodrigo AdãoyBooth School of Business Martin BerajazMIT Nitya Pandalai-NayarUniversity of Texas at Austin AbstractDo economies adjust slowly to certain technological innovations and more rapidly to others?We argue that the adjustment is slower when innovations mainly benefit productionactivities requiring skills which are more different from those used in the rest of the economy.The reason is that, when such skill specificity is stronger, the adjustment of labor marketsis driven less by the fast reallocation of older incumbent workers and more by the gradualentry of younger generations to the benefitted activities. We begin by documenting that theU.S. labor market adjusted differently to the arrival of Information & Communications Technologies(ICT) in the late twentieth century than it did to innovations in manufacturing at thebeginning of that century. We then build an overlapping generations model of technologicaltransitions. It allows us to sharply characterize the effects of skill specificity on equilibriumdynamics, match the evidence in a parsimonious way, and study its welfare implications. Weshow that stronger skill specificity helps to explain why the ICT transition was more unequaland slower, driven entirely by the gradual entry of younger generations who accrued more ofthe welfare gains from ICT innovations.
February 20, 2025, Filed Under: Working PaperHow Costly Are Business Cycle Volatility and Inflation? A Vox Populi Approach EMPCT Working Paper Series No. 2025-0166 pages | PDF Download | PDF in Browser Citation:Georgarakos, Dimitris, Kwang Hwan Kim, Olivier Coibion, Myungkyu Shim, Myunghwan Andrew Lee, Yuriy Gorodnichenko, Geoff Kenny, Seowoo Han, and Michael Weber, “How Costly Are Business Cycle Volatility and Inflation? A Vox Populi Approach”, February 2025. Dimitris GeorgarakosEuropean Central Bank & CEPR Kwang Hwan KimYonsei University Olivier CoibionUT Austin & NBER Myungkyu ShimYonsei University Myunghwan Andrew LeeNew York University Yuriy GorodnichenkoUC Berkeley, CEPR, & NBER Geoff KennyEuropean Central Bank Seowoo HanYonsei University Michael WeberChicago Booth, CEPR, & NBER AbstractUsing surveys of households across thirteen countries, we study how much individuals would be willing to pay to eliminate business cycles. These direct estimates are much higher than traditional measures following Lucas (2003): on average, households would be prepared to sacrifice around 5-6% of their lifetime consumption to eliminate business cycle fluctuations. A similar result holds for inflation: to bring inflation to their desired rate, individuals would be willing to sacrifice around 5% of their consumption. Willingness to pay to eliminate business cycles and inflation is generally higher for those whose consumption is more pro-cyclical, those who are more uncertain about the economic outlook, and those who live in countries with greater historical volatility.
October 25, 2024, Filed Under: Working PaperWeathering the Storm: Supply Chains and Climate Risk EMPCT Working Paper Series No. 2024-0882 pages | PDF Download | PDF in Browser Citation:Castro-Vencenzi, Juanma, Gaurav Khanna, Nicolas Morales, and Nitya Pandalai-Nayar , “Weathering the Storm: Supply Chains and Climate Risk” October, 2024 Juanma Castro-VincenziUniversity of Chicago Gaurav KhannaUniversity of California, San Diego Nicolas MoralesFederal Reserve Bank of Richmond Nitya Pandalai-NayarUniversity of Texas at Austin and NBER AbstractWe characterize how firms structure supply chains under climate risk. Using new data on the universe of firm-to-firm transactions from an Indian state, we show that firms diversify sourcing locations, and that suppliers exposed to climate risk charge lower prices. We develop a general equilibrium spatial model of firm input sourcing under climate risk. Firms diversify identical inputs from suppliers across space, trading off the probability of climate disruptions against higher input costs. We quantify the model using data on 271 Indian regions. Wages are inversely correlated with sourcing risk, giving rise to a cost minimization-resilience tradeoff. Supply chain diversification unambiguously reduces real wage volatility, but ambiguously affects their levels, as diversification may come with high input costs. While diversification mitigates climate risk, it exacerbates the distributional consequences of climate change by reducing wages in regions prone to frequent shocks.
