Research

Targeting Inflation Expectations?
Finalist ECB Young Economist Prize
Submitted
Job Market Paper

Abstract: This paper investigates how agents’ inflation expectations respond to monetary policy changes, using a New Keynesian model with rational expectations, trend inflation, and adaptive learning. Theoretical results suggest that with rational expectations, inflation expectations adjust quickly, driving inflation dynamics, while adaptive learning introduces a more gradual adjustment process dependent on agents’ learning speed. Leveraging a natural experiment with survey data from professional forecasters across 32 countries under Inflation Targeting regimes, I empirically examine these dynamics. Contrary to model predictions, I find that realized inflation leads expectations, with agents often over-predicting inflation following policy changes. This result challenges standard assumptions about the expectations-inflation relationship, suggesting we may overestimate the role of expectations in driving inflation. These findings imply that central banks may enhance credibility by reinforcing targets with actual inflation outcomes, which appear more influential in shaping expectations than previously thought.

Optimal Disinflation with Delegation and Limited Credibility - joint with Luis Rojas
BSE Working Paper No. 1401
New Version!

Abstract: We examine the challenge faced by a government aiming to implement a gradual reduction in inflation by entrusting monetary policy to an independent central bank with limited credibility. Expanding upon the framework established by Barro and Gordon (1983b), we demonstrate that an optimal policy for minimizing the sacrifice ratio of disinflation involves a gradual disinflationary process coupled with the announcement of intermediate targets. The speed at which disinflation occurs strikes a balance between the objective of enhancing credibility and the associated costs of unexpected inflation. Our theoretical framework provides an explanation for the disinflationary experiences observed in Chile and Colombia during the 1990s, wherein these countries established new monetary institutions and steadily achieved single-digit inflation levels through the annual announcement of decreasing inflation targets. We argue that the use of intermediate targets played a pivotal role in their design, facilitating the establishment of credibility with lower output costs.

Evolution of Expectations with Inflation Targeting and Optimal Monetary Policy
Work in Progress
Draft Coming Soon!

The paper investigates the responsiveness of agents’ expectation variance to shifts in monetary policy, utilising subjective expectations to ascertain the speed of learning before and after the implementation of Inflation Targeting. The analysis quantifies the Kalman Gain and the weight agents assign to the inflation target. The findings indicate a sluggish adjustment of agents’ expectations to monetary policy changes, suggesting a reliance on an extended inflation history for expectation formation. Additionally, a minor emphasis on the inflation target by agents is observed. Incorporating these insights into an optimal policy model reveals that, regardless of learning speed, a stronger weight placed on the inflation target by agents diminishes the necessity for aggressive central bank responses during high inflation periods. Furthermore, the central bank’s response aligns more closely with the rational expectations equilibrium when agents allocate a weight of 10% to the inflation target relative to their beliefs.

Networked Inflation Expectations: A Closer Look At Professional Forecasters - joint with Gabriela Stockler
Work in Progress

CV

You can find a copy of my CV below.

Teaching

University of Glasgow

Supervisor, Undergraduate Dissertation - Econ 4006P
Course Coordinator & Co-Lecturer, Growth and Development - Econ 5015 (MSc)

Universitat Autònoma de Barcelona and Barcelona School of Economics

Teaching Assistant, Macroeconomics II
IDEA PhD Programme, Universitat Autònoma de Barcelona
Lecturer: Francesc Obiols, Winter 2020-2021
Lecturer: Nezih Guner, Winter 2021-2022
Lecturer: Alexander Ludwig, Winter 2022-2023

Teaching Assistant, Foundations in Equilibrium Analysis
Barcelona School of Economics
MSc Macroeconomic Policy and Financial Markets, Autumn 2021-22
Lecturers: Esther Hauk & Hugo Rodriguez

Teaching Assistant, Macroeconomics
Barcelona School of Economics
MSc Macroeconomic Policy and Financial Markets, Autumn 2021-22
Lecturers: Francesc Obiols & Juan Manuel Figueres