DISINF: The Distributional Consequences of Inflation
Lead Research Organisation:
London School of Economics and Political Science
Department Name: Centre for Macro-Economics
Abstract
It is often said that inflation is costly because it redistributes from some agents in the economy to others. Yet, this is rarely measured, and its consequences in models with rich heterogeneity remain under-explored. This grant will advance knowledge on the distributional consequences of inflation, adding to existing work that focuses on household inequality, new insights on redistribution within the financial sector, between non-financial firms, and between the private and public sectors.
First, it will use detailed microdata from the financial sector to measure what is the exposure of different groups to inflation risk, which institutions sell and buy inflation risk, and how this affects the differential pass-through of inflation to nominal interest rates. These redistributions can cause costly financial crisis and are often behind financial repression measures.
Second, it will use models of non-financial firms that are differentially exposed to inflation risk and are likely to have their operations impacted by unexpected shocks. The heterogeneous impact of inflation across firms generate a new source of costs of inflation, as they lead to distortions in the allocation of inputs and production that are amplified by price rigidity.
Third, the composition and maturity of the public debt redistributes risk between current generations and future ones. Empirically, the extent to which the government shifts inflation risk between itself and the private economy varies considerably over time, and this affects the cyclicality of the tightness of the government budget constraint as well as the incentives to inflate away the debt. For the central bank, inflation has a differential effect on the attractiveness of banknotes, public digital currency, and private digital currency, and this is turn determines the seignorage revenue that central banks earn and so the financial constraints that monetary policy faces in the pursuit of stable inflation.
First, it will use detailed microdata from the financial sector to measure what is the exposure of different groups to inflation risk, which institutions sell and buy inflation risk, and how this affects the differential pass-through of inflation to nominal interest rates. These redistributions can cause costly financial crisis and are often behind financial repression measures.
Second, it will use models of non-financial firms that are differentially exposed to inflation risk and are likely to have their operations impacted by unexpected shocks. The heterogeneous impact of inflation across firms generate a new source of costs of inflation, as they lead to distortions in the allocation of inputs and production that are amplified by price rigidity.
Third, the composition and maturity of the public debt redistributes risk between current generations and future ones. Empirically, the extent to which the government shifts inflation risk between itself and the private economy varies considerably over time, and this affects the cyclicality of the tightness of the government budget constraint as well as the incentives to inflate away the debt. For the central bank, inflation has a differential effect on the attractiveness of banknotes, public digital currency, and private digital currency, and this is turn determines the seignorage revenue that central banks earn and so the financial constraints that monetary policy faces in the pursuit of stable inflation.
People |
ORCID iD |
| Ricardo Reis (Principal Investigator) |
Publications
Reis R
(2024)
Crises na Economia Portuguesa: de 1910 a 2022
Reis R
(2024)
Household Disagreement about Expected Inflation
Reis R
(2024)
How likely is an inflation disaster?
Reis R
(2023)
What can keep euro area inflation high?
in Economic Policy
Reis R
(2024)
The Global Network of Liquidity Lines
Reis R
(2023)
Four Mistakes in the Use of Measures of Expected Inflation
in AEA Papers and Proceedings
| Description | This project has so far produced the following four published papers, with the following findings: (i) "Four Mistakes in the Use of Measures of Expected Inflation" AEA Papers and Proceedings, 113, May 2023, pp. 47-51 What is expected inflation? The right answer to this question is that there are many expected inflations, by different economic agents, with different information and beliefs. Yet, when people discuss which weights to put in each measure, it is common to argue that the weight should rise with some characteristic, observe that one series is much better in this dimension, and appeal to simplicity to set its weight to 100 percent. Superficially, this seems sensible, or even optimal, given limited attention. But using this argument to focus on one "right" measure of inflation typically leads to the wrong answer to the question at hand. This paper works through four arguments of this type that are increasingly heard in response to the remarkable progress in the past two decades in measuring expected inflation, using both surveys of expectations and models of prices in financial markets. This work was partly validated in ¬ 2021-2022, as these measures provided valuable early signals that an inflation surge was on the way , so it is important to correct these mistakes early. This way, measures of expected inflation measures can continue to reliably guide monetary policy. (ii) "Household Disagreement About Expected Inflation" with Salomé Fofana and Paula Patzelt, In The Research Handbook of Inflation, edited by Guido Ascari and Riccardo Trezzi Edward-Elgar, chapter 15, April 2025. This paper surveys the major facts from research on disagreement between households on what they expect inflation to be. We document them using figures and correlations that capture: the statistical regularities on the observable drivers of disagreement, the measurement of residual disagreement, the usefulness of disagreement to forecast inflation, the response of disagreement to shocks, the disagreement between households and professionals, and the relation between disagreement, risk, and uncertainty. (iii) How likely is an inflation disaster? With Jens Hilscher and Alon Raviv, review of Financial Studies, forthcoming. Long-dated inflation swap contracts provide widely-used estimates of expected inflation. We develop methods to estimate complementary tail probabilities for persistently very high or low inflation using inflation options prices. We show that three new adjustments to conventional methods are crucial: inflation, horizon, and risk. An application of these methods finds: (i) US deflation risk in 2011-14 has been overstated, (ii) ECB unconventional policies lowered the deflation disaster probability, (iii) inflation expectations deanchored in 2021-22, (iv) and reanchored as policy tightened, (v) but the 2021-24 disaster left scars, (vi) US expectations are less sensitive to inflation realizations than in the EZ. (iv) "What Can Keep Euro Area Inflation High" Economic Policy, 38 (115), July 2023, pp 495-517. A central bank that faces inflation above target may fail to bring it down. This article discusses six ways in which this happens because the central bank is dominated by: misjudgment, expectations, fiscal policy, financial markets, recession fears, or external forces. It applies this approach to the challenge facing the ECB in 2023-24. While the euro area is the application in mind, I use economic theory to ask what are the key forces in existing models that will push against the central bank's mandate. For other similar advanced economies, most (or all) of the sources of dominance that stop the central bank from raising interest rates enough to bring down inflation will apply as well. This paper provides some answers to the question: starting from high inflation, when would an interest-rate setting central bank fail to raise policy rates enough because it became dominated by other factors or agents? The hope is that the factors identified can serve as warning signs for what to avoid. There are also several working papers that are being present and submitted to journals: (v) "Estimating the Rise in Expected Inflation from Higher Energy Prices" with Paula Patzeltz When the price of electricity increases by 1%, households' expected inflation increases by 1.2 to 1.5 basis points. But, if those expectations have become unanchored, then the effect is higher by 0.2 to 1.5 bps. This paper arrives at these estimates by exploiting variation both in the time series, and especially in the cross section, from newly-available public data on expected inflation by Euro area households across region, gender, education, and income, and on the cost of energy across region and source. New measures of supply shocks to energy prices derived from the structure of the electricity market raise expected inflation gradually for 8 to 12 months. The rise in energy prices in 2021-23 accounts for only a small share of the rise in expected inflation. (vi) "The Market for Inflation Risk: with Saleem Bahaj, Robert Czech and Sitong Ding Investors wanting to trade inflation risk can do so by writing swap contracts with dealers. Scores of papers in monetary policy have used the prices in these markets as high-frequency measures of expected inflation at multiple horizons and to study how they respond to identified shocks. A vibrant literature in financial economics studies how these measures relate to and complement the measures from inflation-indexed government bonds or the measures from various surveys. Speeches by policymakers often show plots of these prices to assess whether expectations are anchored and whether monetary policy is credibly delivering price stability. This paper studies the relevant players and quantities behind such prices, plotted in figure \ref{fig:intro} for two countries and two horizons. Using detailed regulatory transaction-level data on every over-the-counter inflation swap contract sold in the UK, we identify who buys and sells inflation insurance on a daily basis to study how the prices are formed in the market. With a model of demand and supply, we decompose the price movements into a fundamental and a frictional component. Exploiting the joint variation in prices and quantities, we propose three separate identification strategies for models of segmented financial markets to learn which shocks drive prices at different dates and at different horizons. We then use the data on quantities to clean the price data and produce a new measure of expected UK inflation for 2019-2023, cleaned from frictional variations. The estimated model provides insights into the elasticity of supply and demand in this market, the relative price impact of different investors, how frictions relate to market liquidity, and especially how an institution's answer to a survey of expected inflation correlates with the trading behavior of that same institution. This analysis led to the following lessons about inflation risk: (i) First, at short horizons, hedge funds and dealers alternate between negative and positive net positions that average to zero, while at long horizons, dealers steadily provide inflation protection to pension funds. The market for inflation swaps fits into a segmented-markets model, with dealers playing the role of arbitrageurs. (ii) Second, given heteroskedasticy in the revelation of fundamentals at data release dates, one can use the tie-series variation in price and quantity data to identify these fundamentals. Given individual-level data on institution's positions over time, and granularity in the size of those positions, one can build instrumental variables for the frictional shocks that shift relative demand and supply in those markets. Given high-frequency data, we can exploit the way in which shocks spill over across the segmented markets, to identify the whole system of demand and supply. These three alternative approaches give consistent measures of what market participants expect inflation will be at different horizons. (iii) Third, our measures of expected inflation for long horizons (10 years and above) show that swap prices have overstated the unanchoring of expectations. Around large events, frictions have tended to move in the same direction as fundamentals leading prices to overstate the change in inflation expectations. At short horizons, swap prices are unreliable measures of expected inflation, with large persistent differences between the two. Researchers and policymakers should use swap prices with care, and ideally use our methods (or others) to filter them and extract the right signals for monetary policy and macro analyses. (iv) Fourth, in this market, prices seem to fully reflect information after one to three days, and the slope of the supply function of inflation protection at long horizons by dealer banks is close to horizontal (but not so at short horizons). Therefore, the large fluctuations in quantities traded reflect almost entirely shocks to the trading frictions, while fundamentals account for three quarters of the movements in prives. At short horizons, frictions affecting hedge funds are almost as significant as those affecting dealer banks. (v) Fifth, we found a significant dispersion in the beliefs about inflation within and between types of institutions, and large price impacts of a handful of traders. There is a very significant correlation between the beliefs of banks in answering surveys about expected inflation and their trading activity in the inflation swap markets. (vii) "The Four R-stars: From Interest Rates to Inflation and Back" R-star is a useful counterfactual long-run steady-state value for the real interest rate. Sometimes, it refers to the equilibrium rate where savings equal investment (m), other times to the long-run value for the yield on safe government bonds (y), other times to the natural return earned by inputs when the level of output is at potential (?), and some other times to the neutral monetary policy rate at which inflation is at its expected target value (i). This paper first documents the differing trends of these four R-stars in the quarter-century before the pandemic. Then, it proposes a general framework to make sense of their joint evolution, together with how they affect inflation. Looking ahead, if the steep rise in y and the slight fall in m observed since the pandemic become new trends, the framework points to new challenges facing policymakers. In one scenario, the inflation bias returns, and all nominal interest rates are forever higher. In another, policy rates are near zero while returns on government bonds are high, imposing a double trap, where neither monetary nor fiscal policy can keep output at potential. (viii) "The Global Network of Liquidity Lines" with Saleem Bahaj and Marie Fuchs At the end of 2023, there were 175 cross-border connections between central banks in a global network of liquidity lines that gave access to foreign currency for countries accounting for 79% of world GDP. This paper presents a comprehensive dataset of this network and its characteristics between 2000 and 2023. While the Federal Reserve drove growth in 2007-09, the network expanded as much between 2010 and 2015 through bilateral arrangements involving the ECB and the People's Bank of China. The network structure means that banks without direct access to a source central bank can still have indirect access to its currency. The central intermediaries in the network for all major currencies are the PBoC and the ECB. We find support using cross-country data that the lines reduce CIP deviations at the tails. Liquidity lines are often signed to substitute for a bleeding of FX reserves, but once in place they complement reserves. (ix) "The anatomy of a peg: lessons from China's parallel currencies" with \Saleem Bahaj Two currencies circulate in parallel in China, the mainland CNY and the offshore CNH. This implements capital controls as long as their exchange rate is pegged. This paper characterises this peculiar system by isolating the conventional channels through which monetary and liquidity policies sustain it. Using a rare instance of exogenous transitory increases in the supply of money, we find causal evidence that they depreciate the exchange rate and we pin down the interest elasticity of the demand for reserves. Using an instrument for changes in the demand for money, we quantitatively decompose the success of the peg into the joint contribution of monetary and liquidity policies. Using a model of offshore exchange rates and money creation by banks, we show that a menu of policies can be used, and has been used, to smooth fluctuations of the exchange rate of the yuan with the US dollar. All of the outcomes are posted as they are achieved on my website: https://www.r2rsquared.com/research.html. Also, I have made the data generated from this research publicly available in GitHub repositories, also accessible from the address above. |
| Exploitation Route | The work covered in projects (i), (ii), and (v) can be used to understand the impact of inflation on surveys expectations, as well as the exten to which the data from these surveys can guide monetary policy. This is part of the distributional impacts of inflations across different households. This is an active area of research, with an explosion of work in the last few years, which cites these papes. The work covered in projects (iii) and (vi) can be used to interpret the distributional consequences of inflation over financial institutions, by making sense of the market for inflation swaps and options where these institutions buy and sell protections against inflation. This work will hopefully inspires others to come up with better measures of expected inflation. Also, we leave open the modeling of this financial market, to best understand the frictions that really constrain the bearing of inflation risk. The work covered in projects (iii) and (vii) can be used to evaluate the performance of central banks, and to guide their choices in achieving stable inflation. The work in (vii) is especially relevant, as better measure of R-star are needed by central banks today. The work covered in projects (viii) and (ix) allow us to understand how inflation and other macro shocks affects the global financial system, and how policies to achieve pegs and lend across borders through central banks are implemented. As researchers and policymakers discuss the geopolitical changes in the world today, a major financial part of it is what will happen to the relative weight of the USD and the RMB. This work allows us to understand the determinants of these weights. |
| Sectors | Creative Economy Education Financial Services and Management Consultancy Government Democracy and Justice |
| URL | https://www.r2rsquared.com/research.html |
| Description | The findings in projects (i), (ii), and (v) have been extensively cited in policymaker's speeches about why inflation rose and fell in 2021-25, and have been also referred to in the media. The work covered in projects (iii) and (vi) have led the ECB to start producing tail risk measures of inflation, as evidence by references to these in speeches. The work covered in project (vii) was just recently (January of 2025) explicitly discussed by the president of the Bundesbank and by a governor at the ECB in speeches dedicated to the topic I covered, partly answering the challenges I raised and discussing how the ECB will deal with them in practice. The work covered in project (viii) has been discussed in several policy conferences by IMF officials. The work covered in project (ix) was presented to the OECD meeting of finance ministers, as well as in several policy conferences in Asia. |
| First Year Of Impact | 2023 |
| Sector | Creative Economy,Education,Financial Services, and Management Consultancy,Government, Democracy and Justice,Other |
| Impact Types | Economic Policy & public services |
| Description | Ricardo Reis - Elected Sócio Correspondente, Academia das Ciências de Lisboa |
| Geographic Reach | National |
| Policy Influence Type | Participation in a guidance/advisory committee |
| Impact | independent scientific advice on matters crucial to the country's development |
| URL | https://www.acad-ciencias.pt/eng/ |
| Description | Academic consultant at the Bank of England |
| Organisation | Bank of England |
| Country | United Kingdom |
| Sector | Private |
| PI Contribution | Academic consultant at the Bank of England |
| Collaborator Contribution | Academic consultant at the Bank of England |
| Impact | Academic consultant at the Bank of England |
| Start Year | 2016 |
| Description | Academic consultant at the Federal Reserve Bank of Richmond |
| Organisation | Federal Reserve Bank of Richmond |
| Country | United States |
| Sector | Public |
| PI Contribution | Research to support policymaking and thought leadership on issues important to the Federal Reserve and the Fifth District. |
| Collaborator Contribution | Research to inform policy making |
| Impact | Academic consultant at the Federal Reserve Bank of Richmond |
| Start Year | 2013 |
| Description | Director - Centre For Macroeconomics |
| Organisation | London School of Economics and Political Science (University of London) |
| Department | Centre for Macroeconomics (CFM) |
| Country | United Kingdom |
| Sector | Academic/University |
| PI Contribution | Director, Centre For Macroeconomics |
| Collaborator Contribution | Director, Centre For Macroeconomics |
| Impact | Outputs listed in CFM researchFish contributions |
| Start Year | 2019 |
| Description | Member of the Bundesbank Research Council |
| Organisation | Deutsche Bundesbank |
| Country | Germany |
| Sector | Public |
| PI Contribution | Discussion of topics relevant to monetary policy challenges today. |
| Collaborator Contribution | Access to survey data, discussion of movements in expected inflation. |
| Impact | Informal outputs |
| Start Year | 2019 |
| Description | 7th CEPR Annual Meeting of the International Macroeconomics and Finance Programme (IMF) |
| Form Of Engagement Activity | Participation in an activity, workshop or similar |
| Part Of Official Scheme? | No |
| Geographic Reach | International |
| Primary Audience | Professional Practitioners |
| Results and Impact | The seventh CEPR Annual Meeting of the International Macroeconomics Programme (IMF) took place on 26-27 October 2023. The annual meeting focussed on: International macroeconomics and stabilisation policy New developments in the international monetary system Global drivers of inflation and policy trade-offs Exchange rates, policy regimes, and currency unions Trade, protectionism, and macroeconomic dynamics Currency and international financial markets Capital flows, risk taking, and financial fragility Effects of capital flow management tools Climate change and international finance linkages |
| Year(s) Of Engagement Activity | 2023 |
| URL | https://www.lse.ac.uk/CFM/events-and-seminars/Recent-Events |
| Description | CFM Mouradian Seminar - Dr Claudio Borio |
| Form Of Engagement Activity | A talk or presentation |
| Part Of Official Scheme? | No |
| Geographic Reach | International |
| Primary Audience | Professional Practitioners |
| Results and Impact | Dr. Borio discussed how a "region of stability" exists between monetary and fiscal policy as constellations of the two policies that foster sustainable macroeconomic and financial stability and keep tensions between the policies manageable. Even before the Covid crisis struck, the two policies had been approaching the boundaries of the region. Hence, the recent unique combination of high inflation and widespread financial vulnerabilities. Looking ahead, longer-term government debt trajectories pose the biggest threat. Claudio Borio has been the Head of the Monetary and Economic Department since November 2013. From 1987, Dr Borio held various positions in the Monetary and Economic Department (MED at the BIS): Deputy Head of MED, Director of Research and Statistics, Head of Secretariat for the Committee on the Global Financial System and the Gold and Foreign Exchange Committee. He worked as an economist at the OECD, the country studies branch of the Economics and Statistics Department. Before that, he was a Lecturer and Research Fellow at Brasenose College, Oxford University. He holds a DPhil, an MPhil in Economics, and a BA in Politics, Philosophy and Economics from the same university. |
| Year(s) Of Engagement Activity | 2023 |
| Description | CFM Survey - Evaluating the Spring Budget and the UK's Fiscal Rules |
| Form Of Engagement Activity | Engagement focused website, blog or social media channel |
| Part Of Official Scheme? | No |
| Geographic Reach | International |
| Primary Audience | Public/other audiences |
| Results and Impact | Summary The March 2024 CfM survey asked the members of its UK panel to assess whether the newly announced cut in national insurance contributions would substantially stimulate GDP within a year. The panel was also asked to predict if the next UK government would have to raise taxes to make public debt sustainable. The survey concluded by asking the panel to assess the effectiveness of the UK's fiscal rules in limiting the accumulation of public debt, relative to a no-rules scenario. Most panellists believe the national insurance contribution cut will not stimulate the UK economy and the subsequent government would need to raise taxes to ensure the sustainability of public debt. The majority of the panel believes the current fiscal rules are either ineffective or counterproductive in limiting public debt build-up, with a small fraction suggesting the rules are somewhat effective in their task. Background The March 2024 CfM-CEPR survey asked the members of its panel to forecast the short-run effect of the newly-announced national insurance contribution cut on the UK's GDP, predict whether the next government would have to raise taxes to make public debt sustainable, and to evaluate the current set of fiscal rules. |
| Year(s) Of Engagement Activity | 2024 |
| URL | https://www.cfmsurvey.org/survey-2024-03 |
| Description | CFM Survey - From Peace to Preparedness: Analysing Europe's Expanding Defense Expenditures |
| Form Of Engagement Activity | Engagement focused website, blog or social media channel |
| Part Of Official Scheme? | No |
| Geographic Reach | International |
| Primary Audience | Public/other audiences |
| Results and Impact | Summary The July 2024 CfM survey asked the members of its EU panel to choose the best way to fund EU increases in military spending to meet members' increases in defence expenditures. The panel was also how this expansion in military spending would affect the EU economy over a 5 year horizon. Most panellists believe that borrowing money at the EU level would be the best way to fund increases in military spending. The majority of the panel also believes that increases in defence spending will boost economic growth in the medium-term in the EU. Background The July 2024 CfM-CEPR survey asked the members of its EU panel to choose the best method to fund EU increases in military spending and how this spending increase would affect medium-term economic growth. |
| Year(s) Of Engagement Activity | 2024 |
| URL | https://www.cfmsurvey.org/survey-2024-07 |
| Description | CFM Survey - How will Trump's economic policies affect the EU economy? |
| Form Of Engagement Activity | Engagement focused website, blog or social media channel |
| Part Of Official Scheme? | No |
| Geographic Reach | International |
| Primary Audience | Public/other audiences |
| Results and Impact | Summary The January 2025 CfM-CEPR survey asked the members of its panel on the impact of Trump's tariff plans on the EU economy. A clear majority of the panel believes the effect of US tariffs on EU economic growth to be relatively small, reducing economic growth by less than 1 percentage point over the next four years. Most panellists believe that the EU's best response to US tariffs would be a combination of retaliatory targeted tariffs, trade deals with non-US partners, and taxes or regulatory measures constraining US tech companies. Background The January 2025 CfM survey asked the members of its panel for their opinion on the potential impact of US tariffs on the EU economy. The panellists were asked to estimate how much would the tariffs affect EU economic growth over the next four years, and to suggest the EU's best policy response to the tariff policy. |
| Year(s) Of Engagement Activity | 2025 |
| URL | https://www.cfmsurvey.org/survey-2025-01 |
| Description | CFM Survey - Promoting and Taxing Investment in the UK Budget |
| Form Of Engagement Activity | Engagement focused website, blog or social media channel |
| Part Of Official Scheme? | No |
| Geographic Reach | International |
| Primary Audience | Public/other audiences |
| Results and Impact | Summary The October 2024 CfM survey asked the members of its panel for their opinion on the policies expected in the upcoming UK Autumn Budget on October 30th. The members were asked about changes the UK's fiscal rules that would allow debt to increase for the purpose of greater public investment. The panel was also asked whether increasing capital gains taxes is an effective way to raise revenues over the upcoming decade. Most panellists support changing fiscal rules to allow for increased public investment. The panel is ambivalent whether increasing capital gains taxes is an effective way to raise revenues with most being uncertain, some clearly disagreeing, some agreeing but with substantial caveats. Background The October 2024 CfM survey asked the members of its panel about proposals in the upcoming UK autumn budget. The panellists were asked whether fiscal rules should be altered to allow for greater public investment and whether capital gains taxes should be increased to raise revenues. |
| Year(s) Of Engagement Activity | 2024 |
| URL | https://www.cfmsurvey.org/survey-2024-10 |
| Description | CFM-Mouradian Seminar with Prof Viral Acharya |
| Form Of Engagement Activity | A talk or presentation |
| Part Of Official Scheme? | No |
| Geographic Reach | International |
| Primary Audience | Professional Practitioners |
| Results and Impact | Professor Viral Acharya, gave a presentation on "Pandemic Stimulus and the Banking Stress of 2023". It is almost a year since the mini banking crisis in the United States in March 2023. Was it just a storm in a teacup? Was there really a systemic problem or was it just a problem with a few banks? Should the Federal Reserve and Treasury intervention at that time worry us or comfort us? To what extent were the seeds of the banking stress of 2023 sown by the pandemic-induced monetary stimulus (and lax supervision of what banks did with the money)? Are banks that availed of official backstops after SVB's failure keeping afloat distressed CRE borrowers, merely postponing the eventual day of reckoning? Prof. Viral Acharya will raise and seek to answer some of these questions with data and his recent academic work on how central bank balance-sheet expansion and contraction affect banking sector stability. Viral V. Acharya is the C.V. Starr Professor of Economics in the Department of Finance at New York University Stern School of Business (NYU-Stern). He was a Deputy Governor at the Reserve Bank of India (RBI) during January 2017 to 23rd July 2019 in charge of Monetary Policy, Financial Markets, Financial Stability, and Research. He is a Research Associate of the National Bureau of Economic Research (NBER) in Corporate Finance, a Research Affiliate at the Centre for Economic Policy Research (CEPR), and Research Associate of the European Corporate Governance Institute (ECGI). He is or has been an Academic Advisor to the Federal Reserve Banks of Chicago, Cleveland, Kansas City, New York and Philadelphia, and the Board of Governors, and provided Academic Expert service to the Bank for International Settlements, the International Monetary Fund and the World Bank. He is a Scientific Advisor to the Sveriges Riksbank since February 2024, a member of the Climate-related Financial Risk Advisory Committee (CFRAC) of the Financial Stability Oversight Council for 2023-26, an invited member of the Bellagio Group of academics and policy-makers from central banks and finance ministries since 2021, and a member of the Financial Advisory Roundtable (FAR) of the Federal Reserve Bank of New York since 2020. His primary research interest is in theoretical and empirical analysis of systemic risk of the financial sector, its regulation and its genesis in government- and policy-induced distortions, an inquiry that cuts across several other strands of research - credit risk and liquidity risk, their interactions and agency-theoretic foundations, as well as their general equilibrium consequences, as well as climate-change related risks. |
| Year(s) Of Engagement Activity | 2024 |
| Description | CFM-Mouradian lecture - Prof. Silvana Tenreyro |
| Form Of Engagement Activity | A talk or presentation |
| Part Of Official Scheme? | No |
| Geographic Reach | International |
| Primary Audience | Policymakers/politicians |
| Results and Impact | Professor Silvana Tenreyro, gave a presentation on "The art and science of patience: relative prices and inflation", 26th Geneva report, CEPR 2023. Following more than thirty years of low inflation, advanced economies saw a surge in inflation driven by an unprecedented concomitance of factors linked to the Covid-19 pandemic and the Russian invasion of Ukraine. Central banks around the globe have responded with a sharp tightening of monetary policy. The report takes stock of what has happened, including the monetary policy response in the euro area and the US, and discusses the challenges ahead. Six months after the report was published, Silvana gave her views on how things have unfolded since. Silvana Tenreyro, CBE, is Professor of Economics at the London School of Economics, Fellow of the British Academy and Fellow of the Econometric Society. She is a former External Member of the Bank of England's Monetary Policy Committee, and former President of the European Economic Association (EEA). Currently, she serves as Director of the CEPR International Finance and Macroeconomics Programme and as member of the External Advisory Group of the IMF. She obtained her MA and PhD in Economics from Harvard University and her undergraduate degree from Universidad Nacional de Tucuman, in Argentina. |
| Year(s) Of Engagement Activity | 2023 |
| Description | International Workshop on Macroeconomic Regime Changes: Theory, Evidence, and Policy Challenges Ahead |
| Form Of Engagement Activity | Participation in an activity, workshop or similar |
| Part Of Official Scheme? | No |
| Geographic Reach | International |
| Primary Audience | Professional Practitioners |
| Results and Impact | Jointly organized by the Centre for Macroeconomics (CFM, LSE), the Center for European Studies (CefES, UNIMIB), and the Rimini Center for Economic Analysis-Europe (RCEA-Europe, UNIMIB) The Great Moderation, a benign macroeconomic regime lasting over 40 years in industrialized countries, might be over. The Global Financial Crisis (GFC) and ensuing Great Recession, the COVID-19 pandemic recession, and the geopolitical crisis triggered by Russia's full-scale invasion of Ukraine more recently have probably started a reversal in the favorable supply-side developments that had a key role in the Great Moderation. Hence, key questions concern the characteristics of the emerging macroeconomic regime. Is the new regime ahead inflationary or even stagflationary? Will the new regime show a higher natural interest rate? Will the current productivity slowdown persist in the new macroeconomic regime? And, above all, what are the policy challenges ahead? The workshop gathers academics and policymakers to discuss recent scientific results concerning the end of the Great Moderation, the emergence of a new macroeconomic regime, and the associated challenges for economic policy. Topics of interest, without being exhaustive, concern inflation and stagflation, globalization and de-globalization, the slowdown in productivity growth, demographic and labor market trends, macroeconomic regimes and the financial-business cycle nexus, macroprudential and resilience policies, fiscal and monetary policy in a time of crisis, fiscal policy and financial stability, disinflationary supply-side policies and supply-side growth policies. |
| Year(s) Of Engagement Activity | 2023 |
| URL | https://www.lse.ac.uk/CFM/events-and-seminars/Recent-Events |
| Description | Lecture - Four r*'s: From Interest Rates to Inflation, and Back |
| Form Of Engagement Activity | A talk or presentation |
| Part Of Official Scheme? | No |
| Geographic Reach | International |
| Primary Audience | Professional Practitioners |
| Results and Impact | Keynote lecture at the XXVII annual conference of the Central Bank of Chile, November 2024 This year's Conference will address issues related to interest rate trends both worldwide and in emerging economies. It will examine the causes behind these trends, as well as their implications for monetary policy. As always, the Conference will bring together leading economists specializing in the topic. The keynote speakers this year will be professors Ricardo Reis from the London School of Economics and Atif Mian from Princeton University. Organizers Sofia Bauducco, Mariana García-Schmidt, Atif Mian, Lucciano Villacorta. |
| Year(s) Of Engagement Activity | 2024 |
| URL | https://www.bcentral.cl/en/content/-/details/xxvii-annual-conference |
| Description | Lecture - Inflation in the UK: What Lies Ahead? |
| Form Of Engagement Activity | A talk or presentation |
| Part Of Official Scheme? | No |
| Geographic Reach | National |
| Primary Audience | Professional Practitioners |
| Results and Impact | Bank of England Watchers conference, November 2024 |
| Year(s) Of Engagement Activity | 2024 |
| URL | https://www.kcl.ac.uk/events/bank-of-england-watchers-conference-2024 |
| Description | Monetary Policy in a Shock-Prone World |
| Form Of Engagement Activity | A talk or presentation |
| Part Of Official Scheme? | No |
| Geographic Reach | International |
| Primary Audience | Professional Practitioners |
| Results and Impact | Panel at the IMF / WB annual meetings, October 2024 |
| Year(s) Of Engagement Activity | 2024 |
| URL | https://meetings.imf.org/en/2024/Annual |
| Description | Pablo Hernández De Cos, Governor of the Banco de España - Lessons for monetary policy from the latest inflationary-disinflationary episode |
| Form Of Engagement Activity | A talk or presentation |
| Part Of Official Scheme? | No |
| Geographic Reach | International |
| Primary Audience | Public/other audiences |
| Results and Impact | Public event hosted by the Centre for Macroeconomics and the School of Public Policy In the last few years, central banks across the globe have faced a formidable surge in inflation, stemming from a succession of supply and demand shocks. In response, they have embarked on an extraordinarily sharp monetary policy tightening cycle. In his talk, Governor Hernández de Cos addressed the lessons learned so far from the inflationary-disinflationary episode in the euro area and the European Central Bank's response to it. Pablo Hernández de Cos is Governor of the Banco de España and member of the Governing and General Council of the ECB. He is Chair of the BCBS and of the Advisory Technical Committee of the ESRB. He is member of various European and International Committees including the ESRB, the FSB, the BIS Group of Governors and Heads of Supervision, the Advisory Board of the FSI and the CEMLA. He is also Vice-Chairman of the Board of the Spanish Macroprudential Authority Financial Stability Board (AMCESFI). Ricardo Reis (@R2Rsquared) is Director of the Centre for Macroeconomics and Arthur Williams Phillips Professor of Economics at LSE. |
| Year(s) Of Engagement Activity | 2024 |
| URL | https://www.lse.ac.uk/CFM/events-and-seminars/Past-Events |
| Description | Reassessing Policy Tools for Current and Future Policy Challenges |
| Form Of Engagement Activity | Participation in an activity, workshop or similar |
| Part Of Official Scheme? | No |
| Geographic Reach | International |
| Primary Audience | Professional Practitioners |
| Results and Impact | The IMF held the 25th Jacques Polak Annual Research Conference on November 14-15, 2024, in Washington D.C., USA. With inflation rates gradually aligning with targets, the immediate challenge for the global economy lies in achieving a 'soft landing'-finely balancing the reduction of policy rates without jeopardizing economic stability or inciting future inflationary pressures. This task is made intricate by differentiated inflationary dynamics and the necessity for distinct policy approaches across economies. In addition, many countries need strategies for fiscal consolidation to address elevated debt levels with limited fiscal space, emphasizing the urgency of credible, medium-term adjustments. In this context, the 2024 IMF Annual Research Conference will delve into the nuanced priorities for central banks and fiscal authorities across the world. Special emphasis will be placed on strategies to complete the inflation realignment process, lowering debt burdens, while catalyzing a durable uplift in living standards. Particular attention will be devoted to the importance of maintaining fiscal discipline while safeguarding investments in priority areas and supporting vulnerable populations. Financial regulation will be examined in terms of its effects on the domestic economy as well as its influence on cross-border capital flows. Further, the conference will address the imperative of multilateral cooperation in fortifying the global economy against fragmentation, while fostering international trade. The conference will bring together academics and policy makers, promote innovative research and provide a platform for a fruitful exchange of views |
| Year(s) Of Engagement Activity | 2024 |
| URL | https://www.imf.org/en/News/Seminars/Conferences/2024/11/14/2024-jacques-polak-annual-research-confe... |
| Description | Relative Price Dispersion During the Inflation Disaster |
| Form Of Engagement Activity | A talk or presentation |
| Part Of Official Scheme? | No |
| Geographic Reach | International |
| Primary Audience | Professional Practitioners |
| Results and Impact | Inaugural conference of the ChaMP network on "Current Issues for Monetary Policy Transmission, April 2024 This conference marks the launch of the ChaMP Research Network, which focuses on challenges for monetary policy transmission, amid unprecedented shocks, structural changes and shifting inflation dynamics. It consists of researchers from the ECB and all EU national central banks. Its main goal is to develop research to understand further how these changes have affected the speed, strength, and heterogeneity of monetary policy transmission in the euro area and the European Union. |
| Year(s) Of Engagement Activity | 2024 |
| URL | https://www.ecb.europa.eu/press/conferences/html/20240425_Champ_network.en.html#:~:text=This%20confe... |
| Description | Ricardo Reis - Banco de Portugal conference on the digital euro |
| Form Of Engagement Activity | Participation in an activity, workshop or similar |
| Part Of Official Scheme? | No |
| Geographic Reach | International |
| Primary Audience | Policymakers/politicians |
| Results and Impact | Banco de Portugal conference on the digital euro |
| Year(s) Of Engagement Activity | 2024 |
| Description | Ricardo Reis - Econometric Society Winter Meetings ECB Policy Lecture |
| Form Of Engagement Activity | A talk or presentation |
| Part Of Official Scheme? | No |
| Geographic Reach | International |
| Primary Audience | Professional Practitioners |
| Results and Impact | Plenary lecture |
| Year(s) Of Engagement Activity | 2023 |
| URL | https://www.econometricsociety.org/regional-activities/schedule/2023/12/17/2023-EWMES-Manchester-Uni... |
| Description | Ricardo Reis - Keynote lecture at SUERF workshop on equilibrium interest rates |
| Form Of Engagement Activity | Participation in an activity, workshop or similar |
| Part Of Official Scheme? | No |
| Geographic Reach | International |
| Primary Audience | Policymakers/politicians |
| Results and Impact | This workshop calls for a broader view of "equilibrium interest rate". It explores various concepts of the natural rate along different dimensions, such as time (short versus long-run horizon, short-term versus long-term rates) or sectoral (public debt vs. private capital). Moreover, it addresses the novel concept of the financial (in)stability rate of interest. In addition to a comparative and careful juxtaposition and appraisal of the various concepts, the workshop seeks to answer the following questions: (1) What are past and future trends in the level of these various "equilibrium rates"? (2) Which "equilibrium rate of interest" may be most informative for which policy purpose? This workshop brings together the latest theoretical and empirical research on this topic, which is central for both monetary policy and longer-term structural policies. Presentations aim to be accessible to audiences active in the policy, advisory and investment community, to allow immediate insights for policy and investment decisions. Scientific coordination: Ernest Gnan, SUERF and Maria T. Valderrama, OeNB |
| Year(s) Of Engagement Activity | 2023 |
| URL | https://www.suerf.org/events/equilibrium-real-interest-rates-concepts-current-and-future-drivers-new... |
| Description | Should central banks have an equality mandate? |
| Form Of Engagement Activity | A talk or presentation |
| Part Of Official Scheme? | No |
| Geographic Reach | International |
| Primary Audience | Professional Practitioners |
| Results and Impact | Central banks around the world are usually given a mandate to conduct monetary policy to achieve a small number of aggregate objectives, most often low and stable inflation and full employment. However, there has been increasing pressure to add distributional equity to the list of official goals. An example is a proposal, now in the U.S. Congress, to amend the Federal Reserve Act to "make reducing inequality part of the Fed's mission". This lecture discussed these debates with special emphasis on the role of a central bank's mandate in attaining social welfare. The evaluation of equality as a central bank's goal requires analyzing implications for the incentive properties of the mandate. Such a perspective can justify charging central banks with the reduction of inequality but, at the same time, it delivers novel and unexpected lessons. |
| Year(s) Of Engagement Activity | 2023 |
| URL | https://www.lse.ac.uk/CFM/events-and-seminars/Recent-Events |
| Description | The Credibility Revolution in Inflation Expectations |
| Form Of Engagement Activity | A talk or presentation |
| Part Of Official Scheme? | No |
| Geographic Reach | International |
| Primary Audience | Professional Practitioners |
| Results and Impact | Bank of Canada- The John Kuszczak Memorial Lecture OTTAWA - On Thursday, November 7, 2024, the Bank of Canada hosted its annual economic conference. The theme was "Frontiers of Monetary Policy Design". Academics, policy-makers, private sector economists and representatives from policy think tanks will be among those in attendance. Description The John Kuszczak Memorial Lecture: "The credibility revolution in inflation expectations" |
| Year(s) Of Engagement Activity | 2024 |
| URL | https://www.bankofcanada.ca/2024/11/bank-canada-webcasts-john-kuszczak-memorial-lecture-november-7-2... |
| Description | Weekly columns in major newspaper |
| Form Of Engagement Activity | A magazine, newsletter or online publication |
| Part Of Official Scheme? | No |
| Geographic Reach | National |
| Primary Audience | Public/other audiences |
| Results and Impact | Page 3 column in the business section of the main newspaper in Portugal |
| Year(s) Of Engagement Activity | 2023,2024 |