README - Replication Package
"Why did inflation rise and fall in 2021-24? Channels and evidence from expectations"
Ricardo Reis (LSE), March 2026
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This file maps each folder to the figures and tables it produces in 99-postmortem-v2.pdf.

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1_Forecasting
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Produces: Figure 1 - "Expectations were the leading indicator of the inflation surge"
  Output file: SelectedSeries_2021_overlay.pdf
  Description: T-statistic plot of five indicators (inflation, expected inflation,
               real activity, real interest rate, unemployment) across the 12 months
               of 2021, benchmarked against Jan 2020.

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2_PC  (Phillips Curve)
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Produces:
  Figure 4 - "One-year ahead household expected inflation in the US"
    Output file: msc_mean_and_sd_single_scale.png
    Description: Mean and standard deviation of Michigan survey expected inflation
                 (residualized), 2015-2025.

  Figure 5 - "Forecasting inflation in 2021-24 using a model estimated before the pandemic"
    Output files: inflation_series.pdf (panel a, revised data)
                  inflation_series_newvintages.pdf / inflation_series_oldvintages.pdf (panel b, real-time)
    Description: Actual vs predicted inflation decomposed into expectations, labor
                 market, and supply shock components.

  Figure 6 - "Phillips curves"
    Output file: Combined_plots_A-F.pdf (and Combined_plots_A-F_revised.pdf)
    Description: Six-panel scatter plot of inflation vs unemployment gap and labor
                 market looseness, pre- and post-pandemic, with and without controls
                 for expected inflation.

  Table 4 - "Forecasting performance of Phillips curves for inflation"
    Output files: RMSE.pdf, RMSE_newvintages.pdf, RMSE_oldvintages.pdf
    Description: Root mean squared errors across Phillips curve specifications,
                 revised and real-time data.

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3_Dove  (Policymakers' Dove/Hawk preferences)
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Produces: Figure 10 - "Expectations of inflation and unemployment gaps from FOMC members"
  Output files: sc_SEP_*.pdf (16 scatter plots in Output/ and Output/Scatter/)
  Description: Scatter plots of SEP inflation gap vs unemployment gap expectations,
               comparing pre-COVID (navy) and post-COVID (orange) periods.
               The paper uses the specification with long-run inflation and
               long-run unemployment benchmarks.

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4_PolicyRule
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Produces: Appendix/supplementary regression figures (not in main paper body)
  Output files: Pooled_*.pdf and FE_*.pdf (34 coefficient plots in Output/)
  Description: Pooled OLS and fixed-effects regression coefficients from ECB SPF
               data (standard, inertial, and pi-gap specifications), showing how
               policymakers' inflation and output gap forecasts relate to their
               interest rate expectations.

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5_Institutions
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Produces:
  Figure 8 - "IMF inflation forecasts and actual inflation in four countries"
    Output files: US_NGDPD_vintages.png, FR_NGDPD_vintages.png,
                  UK_NGDPD_vintages.png, CAN_NGDPD_vintages.png
    Description: Actual inflation vs IMF WEO forecast vintages for the US,
                 France, UK, and Canada, 2020-2025.

  Figure 9 - "Contributions of deficits and inflation to the unexpected increase in public debt"
    Output file: weoforecasts.pdf
    Description: Cross-country scatter of unexpected primary deficit contribution
                 vs unexpected inflation contribution to public debt (2019-2024),
                 using WEO 2019 forecasts vs April 2025 actuals.

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8_Market
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Produces:
  Figure 2 - "Market expected US inflation from swaps (10-year) and indexed bonds (5y5y)"
    Output file: T5YIFR_vs_USSWIT10.png
    Description: Daily 5y5y breakeven (FRED T5YIFR) and 10-year swap rate
                 (Bloomberg USSWIT10), 2015-2025.

  Figure 3 - "Market expected UK inflation 10-years ahead against events and shocks"
    Panel (a): LTinflationswaps.pdf  - 10y UK expected inflation cleaned of liquidity
               frictions (Bahaj et al. 2025 series), with shaded monetary policy events.
    Panel (b): LPswaps.pdf           - Local projection impulse responses (pre-2021
               vs post-2021) of long-run expected inflation to CPI surprise shocks.

  (Also produces: LTinflation_bars.pdf - supporting bar chart of long-term inflation
   swap levels with shaded event windows, used in the discussion of Table 1 data.)

  Table 1 - "Tail probabilities for US and EA inflation from option prices"
    Note: The table data comes from an external source (r2rsquaredlse.github.io/
    web-inflationdisasters/). The folder provides the time-series plots that
    contextualise the table.

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9_ExpectationRevisions
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Produces:
  Table 2 - "The sensitivity of US long-run inflation expectations to inflation surprises"
    Output files: SPF_table_precovid.xls, SPF_table_postcovid.xls

  Table 3 - "The sensitivity of EA long-run inflation expectations to inflation surprises"
    Output files: ECBSPF_table_precovid.xls, ECBSPF_table_postcovid.xls

  Final compiled PDF: Expectation_formation_final.pdf
    Description: Panel regressions of changes in long-run inflation forecasts
                 on short-horizon forecast errors, estimated pre-COVID (1992Q2-2019Q4
                 for US; 1999Q4-2019Q4 for EA) and post-COVID (2022Q1-2025Q3),
                 using Philadelphia Fed SPF and ECB SPF individual forecaster data.

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10_Energy
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Produces: Figure 7 - "Energy prices do not drive inflation expectations"
  Output file: energy_predictions.pdf
  Description: EA household 12-month-ahead expected inflation: actual data vs
               full model prediction vs energy-variables-only prediction,
               April 2021 to January 2024. Based on Patzelt and Reis (2024)
               cross-regional electricity price variation specification.
  (Also produces: Exp_lev_model.png - supporting simulation output.)

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SUMMARY TABLE
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Folder              | Paper output
--------------------|-------------------------------------------------------------
1_Forecasting       | Figure 1
2_PC                | Figure 4, Figure 5, Figure 6, Table 4
3_Dove              | Figure 10
4_PolicyRule        | Supplementary/appendix regression coefficient plots
5_Institutions      | Figure 8, Figure 9
8_Market            | Figure 2, Figure 3 (panels a and b)
9_ExpectationRevisions | Table 2, Table 3
10_Energy           | Figure 7

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