Antonio Mele


CV Research Teaching Surrey Seminars            



Contact information

School of Economics

University of Surrey

Guildford (Surrey),  United Kingdom


email: meleantonio (at)

GitHub: @meleantonio


School of Economics, University of Surrey

Research interests

Macroeconomics, Dynamic Contracts, Monetary and Fiscal Policy, Computational Methods


"Repeated Moral Hazard and Recursive Lagrangeans", Journal of Economic Dynamics and Control, Volume 42, May 2014, Pages 69-85

Code on GitHub

This paper shows how to solve dynamic agency models by extending recursive Lagrangean techniques à la Marcet and Marimon (2011) to problems with hidden actions. The method has many advantages with respect to the promised utilities approach (Abreu et al., 1990): it is a significant improvement in terms of simplicity, tractability and computational speed. Solutions can be easily computed for hidden actions models with several endogenous state variables and several agents, while the promised utilities approach becomes extremely difficult and computationally intensive even with just one state variable or two agents.

"Velocity in the Long Run: Money and Structural Transformation" (joint with Radek Stefanski), submitted 

Monetary velocity declines as economies grow. We argue that this is due to the process of structural transformation - the shift of workers from agricultural to non-agricultural production associated with rising income. A calibrated, two-sector model of structural transformation with monetary and non-monetary trade accurately generates the long run monetary velocity of the US between 1869 and 2013 as well as the velocity of a panel of 92 countries between 1980 and 2010. Three lessons arise from our analysis: 1) Developments in agriculture, rather than non-agricultureare key in driving monetary velocity; 2) Inflationary policies are disproportionately more costly in richer than in poorer countries; and 3) Nominal prices and inflation rates are not ‘always and everywhere a monetary phenomenon’: the composition of output influences money demand and hence the secular trends of price levels.

"On the perils of stabilizing prices when agents are learning" (joint with Krisztina Molnar and Sergio Santoro), submitted

We show that price level stabilization is not optimal in an economy where agents have incomplete knowledge about the policy implemented and try to learn it. A systematically more accommodative policy than what agents expect generates short term gains without triggering an abrupt loss of confidence, since agents update expectations sluggishly. In the long run agents learn the  policy implemented, and the economy converges to a rational expectations equilibrium in which policy does not stabilize prices, economic volatility is high, and agents suffer the corresponding welfare losses. However, these losses are outweighed by short term gains from the learning phase.

"Unemployment Insurance, Human Capital and Financial Markets" coming soon
I characterize optimal unemployment insurance in the presence of human capital life-cycle trends and incomplete financial markets. Each worker is subject to unemployment risk, and exerts unobservable effort either to keep her job (if employed) or to find one (if unemployed). Human capital accumulates when she is employed, while depreciates when unemployed. She has access to financial (incomplete) markets, where she can buy or sell risk-free bonds at a constant interest rate to self-insure against unemployment risk. Trading in the financial market is not observable. Numerical examples show that the optimal system has a decreasing but almost flat subsidy, financed by an almost constant payroll tax.

"Dynamic risk sharing with moral hazard"

I characterize the optimal risk sharing contract in dynamic economies with moral hazard. In a full information environment, an optimal contractual arrangement prescribes that agents pool their income and divide it according to a constant sharing rule. When moral hazard is present, the sharing rule changes through time in order to reward effort. As a consequence, consumption inequality is very persistent. If agents have access to unmonitorable asset markets, then they can use their assets to smooth consumption and reduce effort. An optimal contract would avoid that, by imposing an additional cost (a wedge) on savings. As a result, trading in the asset market is restricted.

Research in progress

"Optimal Taxation of Families" (joint with Luigi Balletta)

"Strategic Default"

"Debt and Equity dynamics at the firm and at the aggregate level" (joint with Andrea Caggese)

"Risk sharing, moral hazard and survival"

"A simple theory of the Stability Pact"


Subpages (1): Surrey Seminars