Empirical Macroeconomics Policy Center of Texas

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

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

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.

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.

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

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

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.

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 ⬇️

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

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)

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

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.

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 ⬇️

Now also out as a EMPCT working paper!

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

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.

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

nber.org/papers/w32305

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...

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

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

Alarming

A cautionary take on the rise in inflation expectations in the UMich survey from @ygorodnichenko.bsky.social & Olie Coibion at @empctmacrotx.bsky.social...

The pandemic "inflation surge experience has further unanchored [household & firm] expectations"

sites.utexas.edu/macro/2025/0...

The blog post's documented patterns of inflation expectations & its conclusion below are consistent with the implications of attention changes documented in my paper on the inflation attention threshold (see Figure).

Good to know, that the two Oli's at @utaustinecon.bsky.social agree 😅

Conclusion: Expectations of households and firms, following the inflation surge, have settled at new higher levels after the surge than they were prior to the surge.

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

Once these differences are corrected, the NY Fed SCE looks much more like the MSC

2. NY Fed applies different methodological choices:

a. median vs mean
b. Distribution questions vs point forecasts
c. Panel conditioning effects

1. the Nielsen Homescan panels (with N much larger than in the other surveys), as well as the Indirect Consumer Inflation Expectations survey from the Cleveland Fed look much more like the MSC (see figure above)

They use two strategies:

1. look at other surveys
2. dig deeper into these two surveys to find out where the differences are coming from

Both point to the same answer.

What's happening with inflation expectations?

Two often used household surveys disagree:

- the Michigan MSC says inflation expectations are up
- the NY Fed SCE says they're not...

Which one is it?

New blog by Oli Coibion and @ygorodnichenko.bsky.social says: MSC is right!

Find out why ⬇️

After a great first day of our conference yesterday, we look forward to an exciting second day!

Starting tomorrow: 𝐓𝐄𝐗𝐀𝐒 𝐌𝐎𝐍𝐄𝐓𝐀𝐑𝐘 𝐂𝐎𝐍𝐅𝐄𝐑𝐄𝐍𝐂𝐄

We have a great line-up of speakers & discussants (program below)

including @alpsimsek.bsky.social, @kronerniklas.bsky.social, @pfaeutiecon.bsky.social, @mathpedemonte.bsky.social, @hugolhuillier.com, @elpuntoderocio.bsky.social
(+ some not on here)

Link to the program including more info about our speakers: sites.utexas.edu/macro/events...

We're very much excited and looking forward to two days of great papers and discussions!