Research

My PhD looked at how the economic theories central bankers hold shape monetary policy-making. Specifically, I studied how the theory of the so-called "natural rates" (of unemployment, of interest and of growth) not only underpins the paradigm of modern monetary policy-making and central banks' mandates but also shapes how central banks act. It is (one of) the main  justification for the paradigm but has increasingly come under strain with "empirical anomalies" (hysteresis, endogeneity) after the 2008 crisis building up. My empirical analysis included, one the one hand, semi-structured interviews with high-level central bankers to examine how they square belief in the theory with these anomalies. On the other hand, I conducted both a quantitative and and  qualitative text analysis of central bankers' speeches and research papers published by central banks.  The central banks of the Eurozone, Chile, Argentina and the US serve were my cases. The time horizon under investigation was the monetary policy after the 2008 financial crisis. 

Reviewers: Lucio Baccaro (MPIfG), Mark Blyth (Brown University), André Kaiser (University of Cologne) 

External advisors: Adam Tooze (Columbia University), Manuela Moschella (University of Bologna), Alan Taylor (Columbia University)

Here you can read the abstract:

Abstract

This dissertation examines how central bankers’ belief in the Theory of the Natural Rates (TONR) shapes their cognitive models and contributes to the persistence of monetary policy paradigms after the 2008 Great Financial Crisis (GFC). The TONR posits that key economic variables—unemployment, interest rates, and growth—oscillate around unique natural or equilibrium values that are supply-side determined and exogenous to monetary policy. Monetary policy can affect the short-run fluctuations around these economic variables but not their long-run trajectory. The emergence of phenomena such as hysteresis in growth and unemployment in the post-GFC economic landscape, however, appeared to contradict the TONR. More and more research started to suggest that monetary policy might have real effects even in the long-run and, possibly, endogenously affect the natural rates themselves. Utilizing a comparative analysis of four central banks—the U.S. Federal Reserve, the European Central Bank, the Central Bank of Argentina, and the Central Bank of Chile—this research uses interviews with high-level central bankers and in-depth document analysis to explore how central bankers reconcile empirical anomalies with their adherence to the TONR. The findings reveal a striking commonality: the belief in the TONR exerts a powerful influence across different institutional and regional contexts, often superseding legal mandates and regional peculiarities. Central bankers employ various epistemic strategies, such as adjusting temporal frameworks or ex post revising natural rate estimates, to maintain the TONR’s theoretical “hard core” despite conflicting evidence. The study suggests that ideational change within central banks is more likely to come about through the appointment of new policymakers with different ideas rather than through a change of beliefs of incumbent policymakers. Concretely, whether central banks take seriously the possibility of an endogenous effect of monetary policy on the long-run supply-side of the economy will be shaped by which interpretation of empirical anomalies dominates in the institution’s governing body. The dissertation underscores the importance of understanding the interplay between macroeconomic ideas and institutional dynamics as well as how politics in central banks is embedded in technical ideas and models.

A first step in my research has recently been published in this paper on how policy-makers at the Federal Reserve think about the NAIRU (see below). The work was picked up by Josh Mason in a piece he wrote for Barrons.