Topic: Trade War Shocks, Inflation Compensation, and Price Stability

Lecturer: Professor Dr. Muhammad Ali Nasir

Time: April 9, 2026, 10:00, UTC+8

Venue: Lecture Hall, 4th floor, School of Economics, Jianhu Campus

Biography: Professor Dr. Muhammad Ali Nasir is Professor of Economics at the University of Leeds, a visiting fellow at the University of Cambridge and a visiting professor at Peking University. He holds a PhD in Economics and is greatly interested in the areas of Macroeconomics, Monetary Economics, Political Economy, International Economics and Finance. His recent book is entitled “Off the Target: The Stagnating Political Economy of Europe and Post-Pandemic Recovery”. He is a very experienced and active researcher. He has over 16 years of research experience and has published over 100 peer-reviewed scientific papers. Dr. Nasir is also the editor of world-leading economic journals. Currently, he is working on the challenges of policy formulation and issues around financial, economic and environmental stability, particularly in the era of geopolitical conflicts and trade wars.

Abstract: The U.S.-China trade-war has crucial, yet less understood and underexplored implications for price stability. This paper analyses the effects of U.S.-China trade-war shocks on market-based inflation compensation and price stability. We identify trade-war shocks using event-day heteroskedasticity, exploiting the rise in the variance of financial-market innovations on major trade-war announcement days relative to non-event days. Using daily U.S. data from January 2016 to February 2026, we estimate a structural system including inflation compensation, equity returns, the ten-year Treasury yield, the VIX, and credit spreads. The identification results are consistent with a strong rank-one shift in the residual covariance matrix, supporting the presence of a dominant structural trade-war shock. We further examine how these effects vary with policy uncertainty, shock persistence, the sign of trade-war news, and the weaker growth expectations and higher risk premia rather than persistent cost-push inflationary pressure. Overall, our results highlight how trade policy uncertainty shapes inflation compensation and the broader macro-financial environment.

Rewritten by: Mei Mengqi

Edited by: Li Huihui, Li Tiantian

Source: School of Economics