How did you choose your research topics?
I chose my research topics based on a strong interest in macroeconomics. I wanted to explore important macroeconomic relationships using disaggregated data at the sectoral or regional level for the euro area. This approach allows for a deeper understanding of how these dynamics differ across sectors or regions, which is especially relevant for policymakers when formulating policy decisions.
Can you describe your three PhD essays?
My first chapter studies whether the relation between unemployment and wage growth, the so-called wage Phillips curve, varies across sectors and why. Using sectoral level data for the euro area, I first show that the average slope of the wage Phillips curve is relatively steep. My results further reveal meaningful heterogeneity in the sensitivity of wage growth to unemployment across sectors. What can explain this heterogeneity? A deeper analysis suggests an important role of skills. In particular, the slope of the wage Phillips curve is flatter in the low-skilled sectors and steeper in the high-skilled sectors.
My second chapter examines the pass-through from wages to inflation in the euro area. Together with my coauthors Miguel Ampudia (ECB) and Marco Lombardi (BIS), we find a significant wage-price pass-through, which varies across sectors. Our estimates show that the wage-price pass-through in private services is significantly higher than in industry and takes longer before reaching its peak. While a higher labour intensity is a key component of the pass-through, our estimates hint at an important role for international competition for the tradeable sector: the pass-through is weaker in industries exposed to globalisation.
In my last chapter, I explore, together with my coauthors Sebastian Hauptmeier (ECB) and Fédéric Holm-Hadulla (ECB), the relation between risk sharing and monetary policy in the euro area using regional data on economic activity. We show that risk sharing plays a key role in shaping the real effects of monetary policy. With weak risk sharing, monetary policy shocks trigger a strong and durable response in output. With strong risk sharing, the response is attenuated, and output reverts to its initial level over the medium term.
What could be the policy implications of your thesis?
My thesis highlights that skills heterogeneity matters for the conduct of monetary policy. In particular, the unemployment-inflation trade-off is weaker in the economic activities with a large presence of low-skilled workers. This for example would indicate that expansionary monetary policy tends to exacerbate inequality between high-skilled and low-skilled sectors, through larger wage growth differentials.
Moreover, these results underscore the importance of considering sectoral heterogeneity when formulating a monetary policy response to wage pressures. More specifically, wages catching up to recover the purchasing power lost because of surprise inflation are likely to lead to comparatively larger price pressures in services. Looking ahead, this will make services inflation stickier.
What are you doing now?
I recently joined the International Monetary Fund’s European Department as part of the Economist Program.
* * *
Théodore Renault (right) defended his PhD thesis in International Economics on 27 August 2024. Professor Ugo Panizza (left) presided over the committee, which included Professor Cédric Tille (second from the left), Thesis Supervisor, and, as External Reader, Assistant Professor Jonathon Hazell, Department of Economics, London School of Economics.
Citation of the PhD thesis:
Renault, Théodore Thomas. “Essays in Empirical Macroeconomics.” PhD thesis, Graduate Institute of International and Development Studies, Geneva, 2024.
For access, please contact Dr Renault.
Banner image: Shutterstock/PhotoSGH.
Interview by Nathalie Tanner, Research Office.