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.

Abstract We investigate how dissent in the Federal Open Market Committee (FOMC) is affected by structural macroeconomic shocks obtained using a medium-scale dynamic stochastic general equilibrium model. We find that dissent is less (more) frequent when demand (supply) shocks are the predominant source of inflation fluctuations. In addition, supply shocks are found to raise private sector forecasting uncertainty about the path of interest rates. Since supply shocks impose a tradeoff between inflation and output stabilization while demand shocks do not, our findings are consistent with heterogeneous preferences over the dual mandate among FOMC members as a driver of policy disagreement.

ABSTRACT Transport investments generate benefits that extend well beyond mobility, yet canonical cost–benefit analysis (CBA) remains dominated by travel-time savings. This paper advocates the use of real-estate value uplift as an alternative approach to quantify project benefits, arguing that increased accessibility commands a locational premium. We use a targeted systematic search to identify empirical studies that both quantify the real-estate capitalisation effect and apply it within transport appraisal. Across the fourteen studies identified, the ex post appraisals largely use difference-in-differences for causal inference, yet applicability to ex ante appraisal is ambiguous; the ex ante studies rely on cross-sectional models with limited efforts to address endogeneity. Once capitalisation effects are quantified, appraisal applications are demonstrative, aggregating property value changes while neglecting externalities, supply-side responses, and the validity of model assumptions; many report uplift magnitudes exceeding direct user benefits. We thus outline a framework and research agenda for real-estate-based transport appraisal, incorporating key elements of benefit transfer, the supply and demand of floorspace, agglomeration, hedonic price model design, and value capture. Further theoretical development and empirical work, particularly focussed on causality, transfers, and land use supply shocks, are needed to build confidence for broader adoption within CBA practice.

This study examines how United States chip export controls propagate through the semiconductor sector and reshape China’s integrated circuit value chain. Using the 2020 national input–output table, it constructs a complete allocation coefficient matrix to quantify supply-driven transmission effects on downstream industries. The analysis shows that regulatory revisions to the Export Administration Regulations, expansion of the Entity List, and implementation of the Foreign Direct Product Rule together create a multilayer restriction system covering equipment, software, and materials, which generates structural dependence in critical technological nodes. Empirical results indicate that communication equipment, computer manufacturing, and automotive electronics exhibit the highest exposure to chip supply constraints, while modern service sectors also demonstrate strong sensitivity due to their reliance on digital infrastructure. Chips therefore function not only as essential manufacturing inputs but also as foundational components of the digital economy. The findings highlight the systemic vulnerability of high-technology manufacturing and advanced services to external supply shocks and suggest that strengthening domestic innovation capacity and substitution capability is central to improving industrial resilience.

ABSTRACT Understanding the resilience of global economies amidst increasing natural and man‐made disruptions is crucial for effective policymaking in an increasingly uncertain and interconnected world. However, most existing studies analyze such disruptions in isolation, overlooking their compounded and interactive effects on economic resilience. This study addresses that gap by examining how sustainability uncertainty, energy market volatility, supply chain pressures, and oil market shocks collectively influence global economic resilience. Using monthly data from November 2002 to December 2023, we analyze six key indicators: the sustainability uncertainty index (SUI), the energy uncertainty index (EUI), real commodity factor prices (RCF), oil supply shocks (OSS), oil inventory demand shocks (ODS), and global supply chain pressure (SCP). These indicators are employed to assess their dynamic effects on the Global economic condition index (ECI), a proxy for resilience. A wavelet‐based approach is utilized to capture time‐frequency interactions and nonlinear causality among the variables. The findings reveal that the ECI is most strongly influenced by sustainability and energy uncertainties, particularly during periods of economic weakness, while SCP and OSS amplify downturn effects in the short term. In contrast, RCF shows positive long‐term associations with resilience, and SCP and the SUI display increasingly supportive long‐run relationships, which may reflect adaptive adjustments rather than causal stabilizing effects. These results underscore the importance of robust ESG frameworks, diversified energy strategies, and resilient supply chains with regard to supporting long‐term economic stability in line with global sustainability goals.

For Poland, Russia’s war in Ukraine represented a major downward shock to output and upward shock to inflation. However, the strong real wage growth and fiscal stimulus of recent years have driven a nearly full closing of the output gap. In addition, inflation has returned to target due to both appropriately tight monetary policy and a subsiding of external supply shocks. The main vulnerability that emerged from recent years is an increase in the fiscal deficit to a projected 7 percent of GDP in 2025. This has raised public debt to 59 percent of GDP, a 10 percentage point increase in two years.

Local university expansion and firm innovation: Evidence from skilled labor supply shocks and innovation efficiency

Purpose This paper examines how oil supply shocks and monetary policy actions jointly affect wage inequality in the US, with a particular focus on the role of education. The study addresses three key questions: (1) how exogenous oil supply shocks influence wage inequality, (2) how exogenous monetary policy shocks shape income distribution, and (3) whether these effects differ within and between education groups, revealing the role of human capital in amplifying or mitigating inequality. Design/methodology/approach The analysis uses quarterly US data from 2000 to 2021. Wage inequality is measured using the Theil index constructed from CPS/BLS weekly earnings of full-time workers aged 25 and above, allowing additive decomposition into within- and between-education components (high school, bachelor's and advanced degree). Identification relies on exogenous oil supply news shocks and exogenous monetary policy shocks. A vector autoregression (VAR) framework is estimated, and impulse response functions trace the dynamic effects of both shocks on inequality over a 10-quarter horizon. Findings The results show that overall wage inequality increased by about 15% over the sample period, with roughly 75% driven by within-education dispersion rather than differences across education levels. Oil supply shocks significantly raise wage inequality, increasing dispersion within high-school and advanced-degree groups and widening inequality between education groups. In contrast, contractionary monetary policy shocks compress wage inequality, with the strongest effects observed among advanced-degree earners and a reduction in between-education wage gaps. Research limitations/implications This study focuses exclusively on the US due to data availability at a quarterly frequency, which limits the generalizability of the findings to other economies with different labor market institutions and energy dependence. Wage inequality is measured using CPS/BLS data for full-time workers, excluding self-employed and part-time workers, who may experience different distributional effects. The analysis is confined to education-based groupings and does not account for other dimensions of inequality, such as race, gender or industry. Finally, while exogenous shock measures are used, the VAR framework captures average dynamic responses and may not fully reflect nonlinearities or structural changes across different economic regimes. Practical implications The findings show that macroeconomic policies have important distributional effects. Oil supply shocks significantly increase wage inequality, especially within high-school and advanced-degree groups, implying that energy price volatility can worsen income dispersion. Policies that reduce exposure to oil shocks—such as energy diversification and strategic reserves—may therefore also help limit inequality. Monetary policy, while aimed at stabilizing inflation and output, affects income distribution as well: contractionary shocks compress wage inequality, particularly among highly educated workers. Since most inequality arises within education groups, education alone is insufficient; complementary labor market and earnings-stabilization policies are needed to mitigate the unequal effects of macroeconomic shocks. Originality/value This study is among the first to jointly analyze oil supply shocks and monetary policy shocks using exogenous identification while decomposing wage inequality by education. By highlighting heterogeneous distributional responses across education groups, the paper provides new insights into how energy shocks and stabilization policies interact with human capital to shape income inequality.

Abstract This paper examines the impact of foreign bank entry on domestic firms' credit access and real economic outcomes, leveraging the staggered implementation of deregulation policies in China from 2001 to 2006. These policies allow foreign banks to gradually enter the Chinese banking market, creating differential access to foreign credit across cities. Using a comprehensive firm‐level dataset from the Chinese Manufacturing Census, we find that privately owned enterprises obtain significantly more bank loans and exhibit higher growth in sales and investment compared to their state‐owned counterparts. The benefits of foreign bank entry are most pronounced for firms that are young, small and more financially constrained. Increased competition and bank technology transfer are identified as the key channels driving these effects. Overall, our findings provide robust evidence that policy‐driven foreign credit supply shocks mitigate financing constraints and improve economic outcomes for private enterprises compared to state‐owned firms.

ABSTRACT By decomposing West Texas Intermediate futures price changes into structural supply and demand shocks, this paper shows that dissecting the oil price significantly improves inflation forecasts. Empirically, demand‐driven shocks predict a negative real bond risk premium but a positive inflation risk premium; these opposing effects result in an insignificant net effect on the nominal bond risk premium. A two‐sector New Keynesian model formalizes the dynamics among oil shocks, inflation, and bond yields, reconciling two distinct historical episodes: anchored inflation during the 2000s oil crisis and the surge in tandem with oil prices following the 2022 Russian invasion of Ukraine.

ABSTRACT We investigate how socially responsible investment (SRI) funds respond to different oil-induced price shocks, using Ready's (2018) approach. Using daily data for six SRI indices from March 8, 2016, to November 29, 2024, we apply wavelet coherence and nonlinear causality methods to analyze the time-frequency relationship between oil shocks and SRI fund performance across different market states. Our findings reveal that supply and risk shocks play a significant role in driving the co-movement between oil price dynamics and SRI funds' behavior returns, particularly at medium and lower frequencies, respectively. Risk shocks exhibit a systemic influence, consistently dominating supply and demand shocks, especially in the pre-2021 period and during the COVID-19 pandemic, though their effects fizzle out in stable market conditions. Quantile causality estimates confirm the strong predictive power of risk shocks, particularly at lower quantiles. Our work presents practical implications for ethical investors, dealing with oil-related market risks.

ABSTRACT This paper uses a novel panel multi-level fixed effects empirical strategy to identify credit supply and demand shocks. The paper shows that banks with positive credit supply shocks on the margin expand their portfolio and engage in a risk-taking behavior. The selected bank balance sheet variables have meaningful effects on the bank supply shocks. Moreover, the bank supply and demand shocks aggregated at the bank and industry levels have significant effects on the key macroeconomic variables. The author proposes a framework for the implementation of macro prudential and monetary policy based on the estimated credit shocks.

The fentanyl trade had a “supply shock” that led to a dramatic decrease in overdose deaths during the last years of the Biden Administration, according to a January 8 study published in Science . “Did the illicit fentanyl trade experience a supply shock?” was based partly on Reddit comments, and written by experts in the field, including Keith Humphreys, Ph.D., and senior author Peter Reuter. Lead author is Kasey Vangelov.

Small and medium-sized enterprises (SMEs) play a central role in employment and regional economic development, yet they are highly vulnerable to shocks such as pandemics, energy price spikes, and supply chain disruptions. Scenario modelling, stress testing, and digital twins are used to assess resilience, yet most applications focus on large firms in single-country settings. This article develops a model to stress test the resilience of Slovenian SMEs, calibrated with parameters and mechanisms derived from South African SME resilience studies. A system dynamics model with stocks for cash, inventory, and productive capacity is specified and subjected to demand, supply, financial, and compound shock scenarios, with and without resilience measures such as liquidity buffers, customer and supplier diversification, and basic digital planning capabilities. Results indicate non-linear tipping points where small reductions in liquidity sharply increase the likelihood of distress, and show that combinations of liquidity, diversification, and collaborative supply chain practices reduce the depth and duration of output losses. The study demonstrates how evidence from an African context can inform resilience strategies in a small European economy and provides a transparent, portable modelling architecture that can be adapted to other settings. Implications are discussed for SME managers and for policies supporting sustainable, resilient enterprise ecosystems.

Despite significant research on oil price shocks and exchange rate dynamics, most studies examine these factors independently and focus on average effects, while conventional policy structures often treat these risks as weakly correlated, ignoring the compounding double-hit effect of synchronized shocks. This study aims to fill this gap by exploring the joint, asymmetric, and state-dependent impacts of oil supply shocks and exchange rate uncertainty on foreign reserve accumulation in five MENA economies (Saudi Arabia, UAE, Qatar, Egypt, and Tunisia) from January 2000 to December 2025. Specifically, we investigate the extent to which foreign reserves serve as a buffer amidst the joint impact of oil supply shocks and exchange rate uncertainty in the MENA region. Using an integrated empirical framework, the study combines an Interacted Panel Vector Autoregression (IPVAR) to capture dynamic mean-level responses, panel quantile regression to reveal heterogeneity across reserve regimes, and a panel GARCH-Copula approach to model nonlinear volatility and tail dependence. The empirical results reveal that the buffering capacity of reserves is non-linear and highly sensitive to initial conditions. Exchange rate uncertainty induces a 15.3% contraction in reserves over 24 months, while negative oil supply shocks trigger disproportionately large reserve drawdowns (28.3%), far outweighing the accumulation seen during price booms (8.7%). Significantly, quantile analysis demonstrates that the buffering effect is weakest in reserve-scarce economies, which respond seven to eight times more intensely to shocks than high-reserve counterparts, thereby highlighting strong heterogeneity. Copula estimates confirm a significantly lower-tail dependence (?L = 0.38), indicating that extreme shocks are synchronized rather than independent disturbances. The findings demonstrate that reserve vulnerability in MENA economies is highly nonlinear, with the greatest magnitude when reserves are low. Accordingly, relying on static reserve adequacy benchmarks driven by baseline scenarios is insufficient; instead, MENA policymakers should adopt dynamic, state-contingent reserve management frameworks that explicitly account for tail-risk synchronization and the diminishing buffers during compounding economic or financial shocks.

This paper analyzes the U.S.-China trade war as a sequence of persistent aggregate supply shocks, emphasizing its inflationary consequences and adverse effects on productivity. The escalation of bilateral tariffs and non-tariff trade barriers since 2018 increased production costs and disrupted global value chains across many industries. These measures reduced competition and efficiency, contributing to higher prices and weaker productivity. Unlike demand-driven trade fluctuations, these policy measures affect the economy mainly through the supply side. They raise production costs, push prices upward, and reduce efficiency over time, including in sectors not directly targeted by tariffs. The empirical analysis focuses on the U.S.-China trade conflict over the period 2010-2025, combining country-level and sectoral data. Using local projections and structural vector autoregression techniques, the study identifies exogenous trade policy shocks and traces their dynamic effects on inflation, productivity, and real economic activity in both economies. The results show that tariff shocks lead to a rapid and persistent increase in producer and consumer prices, reflecting higher input costs and fragmentation of global production networks. At the same time, productivity declines gradually but remains weak over time in exposed sectors. This reflects limited access to intermediate inputs, slower technology diffusion, and a shift of resources toward less efficient domestic production. The findings indicate that inflation associated with trade induced supply shocks is more persistent and less responsive to conventional monetary tightening than demand driven inflation. By treating trade wars as aggregate supply shocks, this paper adds to the international macroeconomics literature. It shows that trade restrictions can have large and lasting effects on inflation and productivity. These findings highlight the high macroeconomic costs of strategic protectionism, especially in a more fragmented global economy.

Aim . Analysis of the effectiveness of monetary policy controlling inflation under conditions of simultaneous demand and supply shocks. Methodology . The most conventional linear representations of New Keynesian models (AD-AS and IS-LM-PC), bibliographic and qualitative methods of analysis are used. Results . Under conditions of simultaneous demand and supply shocks, an effective monetary policy aimed at controlling inflation is achieved by a one-time, timely increase in the key rate, as well as by establishing an achievable inflation target, macro and micro prudential restrictions, tightening mandatory liquidity and capital ratios, and increasing the mandatory reserve ratio. At the same time, the key rate raise should have an upper limit and not lead to the accumulation of credit risk in the system. Research implications. This paper contributes to the scientific literature on the analysis of monetary policy implemented by central banks. The practical significance of the paper is expressed in recommendations addressing to increase the effectiveness of monetary policy in controlling inflation and inflation expectations.

We introduce consistent estimators for the number of shocks driving large-dimensional dynamic factor models. Our estimator can be applied to single frequencies and specific frequency bands, making it suitable for disentangling shocks affecting dynamic models with a factor model representation. Noticeably, our estimator requires the time-series and cross-section sizes to diverge simultaneously without any constraint and it is free of nuisance parameters, such as penalization terms. Our methodology appears ideal for macroeconomic analysis, as one can investigate how many shocks drive the business cycle or the long run, although the applicability of our methods is much wider, given the popularity of GDFMs in economics and finance. Its small-sample performance in simulations is excellent. We apply our estimator to the FRED-QD dataset, finding that the U.S. macroeconomy is driven by two shocks: an inflationary demand shock and a deflationary supply shock. Our methodology permits one to accurately estimate the number of shocks that drive medium-sized DSGE models despite their moderate cross-sectional size. Supplementary materials for this article are available online.

A synthesis of government and social media data suggests a disruption, possibly tied to events in China.

We investigate how demand and supply shocks, as perceived by markets, shaped revisions in expected ECB and Fed policy rates during the post-pandemic monetary policy cycle. To this end, we construct a measure of revisions in near-term policy rate expectations and embed it in a two-country daily BVAR model identified through sign and magnitude restrictions. Three patterns emerge. First, both central banks were perceived as more responsive to inflation than in the pre-ELB period, under both demand and supply shocks. Second, supply shocks were seen as being treated similarly to demand shocks, reflecting a lower perceived tolerance for supply-driven inflation. Third, supply shocks became a new source of cross-border spillovers in rate expectations. These findings point to a reconfiguration of perceived central bank reaction functions in high-inflation environments, when the risk of expectations de-anchoring becomes material.