Inflation expectations proprieties during the war: The case of Ukraine
DOI:
https://doi.org/10.18559/ebr.2025.1.1813Keywords:
inflation expectations, mutual information, dynamic time warping, warAbstract
This study compares consumer and professional inflation expectations in Ukraine before and during the Russian invasion of Ukraine. We apply entropy-based measures to tackle co-movements of expectations and macro variables (inflation, food inflation, exchange rate and production) and dynamic time warping to assess their forward and backward orientation. The pre-war sample spans from May 2019 to February 2022, and the war sample from March 2022 to December 2024. We expected to find differences between pre-war and wartime samples, as war constitutes a political shock with severe economic consequences. The study confirms the change of expectations: more substantial mutual information with past inflation in most cases, better alignment between professionals and consumers, and a change in the distances between expectations and past or future inflation. This is the first empirical study discussing Ukrainian economic agents’ expectations during the full-scale invasion.
JEL Classification
Miscellaneous Mathematical Tools (C65)
Expectations • Speculations (D84)
General (E50)
Downloads
References
Abildgren, K., & Kuchler, A. (2021). Revisiting the inflation perception conundrum. Journal of Macroeconomics, 67, 103264.
View in Google Scholar
DOI: https://doi.org/10.1016/j.jmacro.2020.103264
Afunts, G., Cato, M., & Schmidt, T. (2023). Inflation expectations in the wake of the war in Ukraine. ERGE-EI Working Paper Series, 745.
View in Google Scholar
DOI: https://doi.org/10.2139/ssrn.4391259
Będowska-Sójka, B., Kliber, A., & Rutkowska, A. (2021). Is Bitcoin still a king? Relationships between prices, volatility and liquidity of cryptocurrencies during the pandemic. Entropy, 23(11), 1386.
View in Google Scholar
DOI: https://doi.org/10.3390/e23111386
Behrendt, S., & Schmidt, A. (2021). Nonlinearity matters: The stock price–trading volume relation revisited. Economic Modelling, 98, 371–385.
View in Google Scholar
DOI: https://doi.org/10.1016/j.econmod.2020.11.004
Bracha, A., & Tang, J. (2022). Inflation levels and (in)attention. Working Papers, 22-4.
View in Google Scholar
DOI: https://doi.org/10.29412/res.wp.2022.04
Camacho, M., Romeu, A., & Ruiz-Marin, M. (2021). Symbolic transfer entropy test for causality in longitudinal data. Economic Modelling, 94, 649–661.
View in Google Scholar
DOI: https://doi.org/10.1016/j.econmod.2020.02.007
Coibion, O., & Gorodnichenko, Y. (2015). Inflation expectations in Ukraine: A long path to anchoring? Visnyk of the National Bank of Ukraine, 233, 6–23.
View in Google Scholar
DOI: https://doi.org/10.26531/vnbu2015.233.006
Coibion, O., Gorodnichenko, Y., Kumar, S., & Pedemonte, M. (2020). Inflation expectations as a policy tool? Journal of International Economics, 124, 103297.
View in Google Scholar
DOI: https://doi.org/10.1016/j.jinteco.2020.103297
Conrad, C., Enders, Z., & Glas, A. (2022). The role of information and experience for households’ inflation expectations. European Economic Review, 143, 104015.
View in Google Scholar
DOI: https://doi.org/10.1016/j.euroecorev.2021.104015
Danylyshyn, B., & Bohdan, I. (2022). Monetary policy during the wartime: How to ensure macroeconomic stability. Management and Financial Innovations, 19, 344– 359.
View in Google Scholar
DOI: https://doi.org/10.21511/imfi.19(2).2022.30
Dovern, J., Fritsche, U., & Slacalek, J. (2012). Disagreement among forecasters in G7 countries. The Review of Economics and Statistics, 94(4), 1081–1096.
View in Google Scholar
DOI: https://doi.org/10.1162/REST_a_00207
Dräger, L., Gründler, K., & Potrafke, N. (2022). Political shocks and inflation expectations: Evidence from the 2022 Russian invasion of Ukraine. CESifo Working Papers, 9646, 1–40. https://www.cesifo.org/en/publikationen/2022/working-paper/political-shocks-and-inflation-expectations-evidence-2022-russian
View in Google Scholar
DOI: https://doi.org/10.2139/ssrn.4388729
El Amouri, H., Lampert, T., Gançarski, P., & Mallet, C. (2023). Constrained DTW preserving shapelets for explainable time-series clustering. Pattern Recognition, 143(8), 109804.
View in Google Scholar
DOI: https://doi.org/10.1016/j.patcog.2023.109804
Franses, P. H., & Wiemann, T. (2020). Intertemporal similarity of economic time series: An application of dynamic time warping. Computational Economics, 56(4), 59–75.
View in Google Scholar
DOI: https://doi.org/10.1007/s10614-020-09986-0
Galati, G., Moessner, R., & van Rooij, M. (2022). Reactions of household inflation expectations to a symmetric inflation target and high inflation. DNB Working Paper, 743. https://www.dnb.nl/media/3qcmowuf/working_paper_no_743.pdf
View in Google Scholar
DOI: https://doi.org/10.2139/ssrn.4099985
Gerberding, C. (2001). The information content of survey data on expected price development for monetary policy. Deutsche Bundesbank Discussion Paper, 9/01. https://www.bundesbank.de/resource/blob/703038/1c77b0944064608cbc555d-5b1e1e7482/mL/2001-07-09-dkp-09-data.pdf
View in Google Scholar
Gertchev, N. (2021). The illusions of inflation targeting, with an application to Ukraine. Quarterly Journal of Austrian Economics, 24(1), 41–78.
View in Google Scholar
DOI: https://doi.org/10.35297/qjae.010086
Grimme, C., Henzel, S., & Wieland, E. (2014). Inflation uncertainty revisited: A proposal for robust measurement. Empirical Economics, 47, 1497–1523.
View in Google Scholar
DOI: https://doi.org/10.1007/s00181-013-0789-z
Guirola, L., & Kataryniuk, I. (2022). Changes in consumer inflation expectations in response to the recent rise in prices and the war in Ukraine. Economic Bulletin, 2. https://www.bde.es/f/webbde/SES/Secciones/Publicaciones/InformesBoletinesRevistas/BoletinEconomico/22/T2/Files/be2202-it-Box2.pdf
View in Google Scholar
Gülşen, E., & Kara, H. (2019). Measuring inflation uncertainty in Turkey. Central Bank Review, 19, 33–43.
View in Google Scholar
DOI: https://doi.org/10.1016/j.cbrev.2019.06.003
Hope, O. H., & Tony, K. (2005). The association between macroeconomic uncertainty and analysts’ forecast accuracy. Journal of International Accounting Research, 4, 23–38.
View in Google Scholar
DOI: https://doi.org/10.2308/jiar.2005.4.1.23
Lahmiri, S., & Bekiros, S. (2020). Renyi entropy and mutual information measurement of market expectations and investor fear during the COVID–19 pandemic. Chaos, Solitons & Fractals, 139, 110084.
View in Google Scholar
DOI: https://doi.org/10.1016/j.chaos.2020.110084
Liadze, I., Macchiarelli, C., Mortimer-Lee, P., & Sanchez Juanino, P. (2023). Economic costs of the Russia–Ukraine war. The World Economy, 46, 874–886.
View in Google Scholar
DOI: https://doi.org/10.1111/twec.13336
Linfoot, E. H. (1957). An informational measure of correlation. Information and Control, 1(1), 85–89.
View in Google Scholar
DOI: https://doi.org/10.1016/S0019-9958(57)90116-X
Londono, J. M., Ma, S., & Wilson, B. A. (2023). Global inflation uncertainty and its economic effects. FEDS Notes. https://www.federalreserve.gov/econres/notes/feds-notes/global-inflation-uncertainty-and-its-economic-effects-20230925.html
View in Google Scholar
DOI: https://doi.org/10.17016/2380-7172.3391
Lukianenko, I., Nasachenko, M., & Tokarchuk, T. (2022). Inflation expectations investigation using Markov regime-switching autoregression. Montenegrin Journal of Economics, 18(1), 19–29.
View in Google Scholar
DOI: https://doi.org/10.14254/1800-5845/2022.18-1.2
Łyziak, T. (2014). Inflation expectations in Poland, 2001–2013. Measurement and macroeconomic testing. NBP Working Paper, 178. https://static.nbp.pl/publikac-je/materialy-i-studia/178_en.pdf
View in Google Scholar
DOI: https://doi.org/10.2139/ssrn.2646519
Łyziak, T., & Mackiewicz-Łyziak, J. (2014). Do consumers in Europe anticipate future inflation? Has it changed since the beginning of the financial crisis? Eastern European Economics, 52(3), 5–32.
View in Google Scholar
DOI: https://doi.org/10.2753/EEE0012-8775520301
Mankiw, N., & Reis, R. (2002). Sticky information versus sticky prices: A proposal to replace the New Keynesian Phillips Curve. The Quarterly Journal of Economics, 117(4), 1295–1328.
View in Google Scholar
DOI: https://doi.org/10.1162/003355302320935034
Maurya, P., Bansal, R., & Mishra, A. (2023). Russia–Ukraine conflict and its impact on global inflation: An event study-based approach. Journal of Economic Studies, 50, 1824–1846.
View in Google Scholar
DOI: https://doi.org/10.1108/JES-01-2023-0003
Meyer, P. E. (2008). Information-theoretic variable selection and network inference from microarray data [PhD thesis]. Université Libre de Bruxelles.
View in Google Scholar
Meyer, P. E. (2014). Infotheo: Information-theoretic measures. R package version 1.2.0. https://CRAN.R-project.org/package=infotheo
View in Google Scholar
Moessner, R., & Takáts, E. (2020). How well-anchored are long-term inflation expectations? BIS Working Paper, 869.
View in Google Scholar
NBU. (2022a, July). Inflation report. National Bank of Ukraine.
View in Google Scholar
NBU. (2022b). NBU buys out war bonds for UAH 20 billion and may continue financing critical expenses of government under martial law. National Bank of Ukraine. https://bank.gov.ua/en/news/all/natsionalniy-bank-vikupiv-viyskovi-obligatsi-yi-na-20-mlrd-grn-i-za-neobhidnosti-prodovjit-finansuvati-kritichni-vidatki-ury-adu-v-umovah-voyennogo-stanu
View in Google Scholar
NBU. (2022c). Resolution of the board on operation of banking system under martial law. Resolution 18. National Bank of Ukraine. https://bank.gov.ua/en/legislation/Resolution_24022022_18
View in Google Scholar
NBU. (2025). Surveys data. National Bank of Ukraine. https://bank.gov.ua/en/statistic/nbusurvey
View in Google Scholar
Raihan, T. (2017). Predicting US recessions: A dynamic time warping exercise in economics. SSRN Electronic Journal. https://ssrn.com/abstract=3047649
View in Google Scholar
DOI: https://doi.org/10.2139/ssrn.3047649
Reis, R. (2006). Inattentive consumers. Journal of Monetary Economics, 53(8), 1761– 1800. https://doi.org/10.1016/j.jmoneco.2006.03.001
View in Google Scholar
DOI: https://doi.org/10.1016/j.jmoneco.2006.03.001
Ropele, T., & Tagliabracci, A. (2024). Perceived economic effects of the war in Ukraine: Survey-based evidence from Italian firms. Applied Economics Letters, 31, 275–280.
View in Google Scholar
DOI: https://doi.org/10.1080/13504851.2022.2131710
Rutkowska, A., & Szyszko, M. (2022). New DTW windows type for forward and backward-lookingness examination. Application for inflation expectation. Computational Economics, 59, 701–718.
View in Google Scholar
DOI: https://doi.org/10.1007/s10614-021-10103-y
Rutkowska, A., Szyszko, M., & Próchniak, M. (2024). Consumer and professional inflation expectations – properties and mutual dependencies. Comparative Economic Research. Central and Eastern Europe, 27(3), 93–116.
View in Google Scholar
DOI: https://doi.org/10.18778/1508-2008.27.23
Sakoe, H., & Chiba, S. (1978). Dynamic programming algorithm optimization for spoken word recognition. IEEE Transactions on Acoustics, Speech, and Signal Processing, 26(1), 43–49.
View in Google Scholar
DOI: https://doi.org/10.1109/TASSP.1978.1163055
Savolchuk, K., & Yukhymenko, T. (2023). The NBU’s credibility in the formation of firms’ inflation expectations. NBU Working Papers, 04/2023. https://bank.gov.ua/admin_uploads/article/WP_2023-04_Savolchuk_Yukhymenko.pdf
View in Google Scholar
Seiler, P. (2022). The Ukraine war has raised long-term inflation expectations. VoxEU. https://cepr.org/voxeu/columns/ukraine-war-has-raised-long-term-inflation-expectations
View in Google Scholar
Shoja, M., & Soofi, E. S. (2017). Uncertainty, information, and disagreement of economic forecasters. Econometric Reviews, 36(6–9), 796–817.
View in Google Scholar
DOI: https://doi.org/10.1080/07474938.2017.1307577
Sohag, K., Islam, M., Tomas Žiković, I., & Mansour, H. (2023). Food inflation and geopolitical risks: Analyzing European regions amid the Russia–Ukraine war. British Food Journal, 125, 2368–2391.
View in Google Scholar
DOI: https://doi.org/10.1108/BFJ-09-2022-0793
Szyszko, M., Rutkowska, A., & Kliber, A. (2020). Inflation expectations after financial crisis: Are consumers more forward-looking? Economic Research-Ekonomska Istraživanja, 33, 1052–1072.
View in Google Scholar
DOI: https://doi.org/10.1080/1331677X.2019.1595083
Vintsyuk, T. K. (1968). Speech discrimination by dynamic programming. Cybernetics, 4(1), 52–57.
View in Google Scholar
DOI: https://doi.org/10.1007/BF01074755
Woodford, M. (2003). Interest and prices. Foundations of a theory of monetary policy. Princeton University Press.
View in Google Scholar
DOI: https://doi.org/10.1515/9781400830169
Zholud, O., Lepushynskyi, V., & Nikolaichuk, S. (2019). The effectiveness of the monetary transmission mechanism in Ukraine since the transition to inflation target- of the National Bank of Ukraine, 247, 19–37.
View in Google Scholar
DOI: https://doi.org/10.26531/vnbu2019.247.02
Downloads
Published
Issue
Section
License
Copyright (c) 2025 Magdalena Szyszko, Aleksandra Rutkowska, Olena Motuzka
This work is licensed under a Creative Commons Attribution 4.0 International License.
