As part of the Vilfredo Pareto Research Seminar series, the International Economics Department at the Geneva Graduate Institute is pleased to invite you to a public talk given by Giancarlo Corsetti, Pierre Werner Chair and Professor of Economics at European University Institute (EUI).
He will present his work titled Gambling to Preserve Price (and Fiscal) Stability, joint with Bartosz Mackowiak.
Abstract: We study a model in which policy aims at aggregate price stability. A fiscal imbalance materializes that, if uncorrected, must cause inflation, but the imbalance may get corrected in the future with some probability. By maintaining price stability in the near term, monetary policy can buy time for a correction to take place. The policy gamble may succeed, with price stability preserved indefinitely, or fail, leading to a delayed, possibly large jump in the price level. The resulting dynamics resemble the models of a currency crisis following Krugman (1979) and Obstfeld (1986). Like in Obstfeld’s work, multiple equilibria arise naturally: whether or not price stability is preserved may depend on private agents’ expectations. The model can be reinterpreted as a model of partial default on public debt, in which case it is reminiscent of Calvo (1988).
About the Speaker
Giancarlo Corsetti (Ph.D. Yale, 1992) returned to the EUI in January 2022, as Pierre Werner Chair and Professor of Economics, a position he previously held between 2003 and 2010. He was formerly Professor of Macroeconomics at Cambridge University, fellow of Clare College and director of the Cambridge INET Institute. He also taught at the Universities of Rome III, Yale and Bologna. He is a leading scholar in international economics and open macro with pioneering contributions on currency, financial and sovereign crises, monetary and fiscal policy in open economy, and the international transmission and global imbalances, published in top academic journals. He served as co-editor of the Journal of International Economics between 2005 and 2016. In 2014, he received the Best in Class Award by his alma mater, the University of Rome La Sapienza, where he was invited to deliver the Federico Caffe’ Lecture in 2019. In 2015 he gave the Schumpeter Lecture at the Meetings of the European Economic Association in Manheim. In 2020, he was elected fellow of the British Academy.
He is a consultant at the European Central Bank and the Bank of England and a regular visiting professor in central banks and international institutions. He is research fellow of the Centre for Economic Policy Research, where he served as co-director of the International Macroeconomic Programme between 2004 and 2015. He is a member the European Economic Association, where he served as a member of the council, and Program Chairman of the 2007 Annual Congress in Budapest. Since 2018, he serves in the United Nations High-level Advisory Board on Economic and Social Affairs.