In early 2021, people had already started commenting that inflation might be coming back. But few people could predict just how high it would go. In January 2022, year-on-year inflation in the OECD area rose to 7.2 percent. Consumer price inflation in the United States hit a 40-year high of 7.5 percent that same month. The ongoing war in Ukraine is now adding to these inflationary pressures.

This raises the question: How do managers deal with such macroeconomic shocks? As professors of economics and accounting, we’re naturally interested in examining how managers decipher macroeconomic signals. Are they able to understand the drivers of these signals and split them up into relevant components? And what can firms do to help their managers make the best decisions?

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