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Macroeconomic Expectations in a War

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  • Yuriy Gorodnichenko
  • Vittal Vasudevan

Abstract

Using short‐ and long‐term macroeconomic forecasts, we estimate the projected cost of the Russian full‐scale invasion of Ukraine for countries in Eastern Europe, the Caucasus, and Central Asia. Shortly after the invasion, the projected cumulative cost over 6 years stood at $2.44 trillion for the region. Professional forecasters predicted a dramatic increase in macroeconomic uncertainty, significant spillover effects, some hysteresis effects, as well as a changing nature of macroeconomic variation. We also use the war shock to study how professional forecasters acquire and process information. Our results point to state dependence as well as an important role of forward information in shaping the macroeconomic outlook of professional forecasters.

Suggested Citation

  • Yuriy Gorodnichenko & Vittal Vasudevan, 2026. "Macroeconomic Expectations in a War," Scottish Journal of Political Economy, Scottish Economic Society, vol. 73(3), July.
    • Handle: RePEc:bla:scotjp:v:73:y:2026:i:3:n:e70064
    DOI: 10.1111/sjpe.70064
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