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Macroeconomic Expectations in a War

Author

Listed:
  • Gorodnichenko, Yuriy

    (University of California, Berkeley)

  • Vasudevan, Vittal

    (UC Berkeley)

Abstract

Using a short- and long-term macroeconomic forecasts, we estimate the cost of the Russian full-scale invasion of Ukraine for countries in Eastern Europe, Caucasus, and Central Asia. Shortly after the Russian attack, the projected cost (cumulative over six 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 business cycles. 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 macroeconomic outlook of professional forecasters.

Suggested Citation

  • Gorodnichenko, Yuriy & Vasudevan, Vittal, 2025. "Macroeconomic Expectations in a War," IZA Discussion Papers 18017, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp18017
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    References listed on IDEAS

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    Cited by:

    1. Yuriy Gorodnichenko & Maurice Obstfeld, 2026. "You only live twice: Financial inflows and growth in a westward-facing Ukraine," Working Paper Series WP26-1, Peterson Institute for International Economics.

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    JEL classification:

    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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