Ricardo Reis

Ricardo A. M. R. Reis (born 1 September 1978) is a Portuguese economist and the A. W. Phillips professor of economics at the London School of Economics. In a 2013 ranking of young economists by Glenn Ellison, Reis was considered the top economist with a PhD between 1996 and 2004.,[1] and in 2016 he won the Germán Bernácer Prize for top European-born economist researching macroeconomics and finance. He writes a weekly op-ed for the Portuguese newspaper Jornal de Notícias and participates frequently in economic debates in Portugal.

For the heteronym of Fernando Pessoa, see Fernando Pessoa.
For the novel by José Saramago, see The Year of the Death of Ricardo Reis.
Ricardo Reis
Born (1978-09-01) September 1, 1978
Porto, Portugal
InstitutionLondon School of Economics
FieldMacroeconomics
School or
tradition		New Keynesian economics
Alma materHarvard University (Ph.D., 2004)
LSE (B.Sc., 1999)
InfluencesN. Gregory Mankiw
ContributionsESBies or SBBS; The misallocation hypothesis for the European slump and crisis; QE and central bank solvency ; HANK model; Automatic stabilizers and transfer multipliers ; Sticky information ; Disagreement in inflation expectations
AwardsBest young money-finance economist, BdF-TSE price (2017); Best European macroeconomist under the age of 40, Bernacer prize (2016); Excellence award in global economic affairs, Kiel (2013); Kenneth Arrow Prize (2004).
Information at IDEAS / RePEc

Academic career

Reis earned his Bachelor of Science (B.Sc.) degree from the London School of Economics in 1999, and his Doctor of Philosophy (Ph.D.) from Harvard University in 2004. He taught at Princeton University from 2004 to 2008 before moving to Columbia University where he became a full professor at the age of 29, one of the youngest ever in the history of the university. He is an academic advisor and visiting scholar at central banks around the world, and sits on the board of multiple institutions.

Economic contributions

Sticky information and inattentiveness

In 2002, with Gregory Mankiw he proposed the sticky-information Phillips curve[2] and followed it later with rational theories of inattention,[3] and sticky-information models in general equilibrium.[4] This model of nominal rigidities is based on the slow diffusion of information among the population of price setters and displays three related properties that are more consistent with accepted views about the effects of monetary policy. First, disinflations are always contractionary (although announced disinflations are less contractionary than surprise ones). Second, monetary policy shocks have their maximum impact on inflation with a substantial delay. Third, the change in inflation is positively correlated with the level of economic activity.

Empirical study of disagreement in surveys

In 2004, with Gregory Mankiw and Justin Wolfers, Reis started the modern empirical literature that focuses on disagreement in surveys.[5] A large literature that followed has documented the empirical properties of disagreement, has shown that it is very different from uncertainty, and has used it as moments to evaluate imperfect information models.

Pure inflation

In 2010, with Mark Watson, Reis developed measures of pure inflation, which have become popular measures of core inflation used by central banks around the world.[6]

The diabolic loop and ESBies

In 2011, Reis with Markus Brunnermeier, Luis Garicano, Philip R. Lane and others, argued that when banks hold significant amounts of bonds issued by their sovereign this creates a ``diabolic loop" whereby small changes in the perceived solvency of the sovereign can amplify into large crises.[7] This concept has become central in accounts of the Euro crisis, and is also referred to as the "doom loop" or the "bank-government nexus". They proposed creating European Safe Bonds (ESBies) a new financial vehicle allowing banks in the Eurozone to break the diabolic loop, without creating the problems of joint and several liability with Eurobonds.[8] The European Systemic Risk Board proposed a variant of ESBies, labelled Sovereign Bond-Backed Securities (or SBBS) as a crucial ingredient to have a more stable Eurozone.

HANK models

In 2012, Reis wrote the first model that merged the Aiyagari model of incomplete markets with a New Keynesian model of nominal rigidities.[9] In 2016, he published the first business-cycle model that merged the Krusell-Smith model of business cycles with the Christiano–Eichenbaum–Evans model of monetary policy.[10] These models were later baptized HANK, or Heterogeneous Agent New Keynesian Models.

Central bank solvency

In 2013, with Robert E. Hall he invented the concept of central bank insolvency to describe the impact of possible losses from quantitative easing programs.[11][12]

The misallocation hypothesis of slumps and crashes

In 2013, he proposed the misallocation hypothesis for the European slump and crash.[13] It contends that by joining the eurozone, countries in the European periphery enjoyed large capital inflows, but their underdeveloped financial and political systems misallocated this capital leading to a slump in productivity and sowing the seeds of the crisis. Fast financial integration without financial depth creates a slump and a crash. Some accounts of why low real interest rates can be causing misallocation and low productivity build on his idea.

QE and satiating the market for reserves

In 2016, at the Kansas City Federal Reserve economic policy symposium, Reis proposed that a central bank's balance sheet should be just large enough to satiate the demand for bank reserves.[14] In modern monetary systems, where deposits at the central bank are the key monetary instrument, ensuring that the deposit rate equals the private interbank rate achieves the Friedman rule.

Automatic stabilizers

In 2016, with Alisdair McKay he showed that automatic stabilizers can be very effective by reducing the need for precautionary savings at the start of recessions.[15]

References
  1. Ellison, G. (2013) "How Does the Market Use Citation Data? The Hirsch Index in Economics," AEJ: Applied Economics, 5 (3), 63–90, doi:10.1257/app.5.3.63
  2. Mankiw, N.G. and R. Reis (2002) "Sticky Information Versus Sticky Prices: A Proposal To Replace The New Keynesian Phillips Curve," Quarterly Journal of Economics, 117(4), 1295–1328, doi:10.1162/003355302320935034
  3. R. Reis (2006) "Inattentive Producers," Review of Economic Studies, 73(3), 793–821, doi:10.1111/j.1467-937X.2006.00396.x
  4. Mankiw, N.G. and R. Reis (2010) Imperfect Information and Aggregate Supply" Handbook of Monetary Economics doi:10.1016/B978-0-444-53238-1.00005-3
  5. Mankiw, N. G., J. Wolfers and R. Reis (2004) "Disagreement about Inflation Expectations" NBER Macroeconomics Annual, 18, 209–248 doi:10.3386/w9796
  6. Reis, R. and M. Watson (2010) "Relative Goods' Prices, Pure Inflation, and the Phillips Correlation" AEJ: Macroeconomics, 2 (3), 128–57 doi:10.1257/mac.2.3.128
  7. Brunnermeier, Garicano, Lane, Marco Pagano, Reis, Santos, Thesmar, van Nieuwerburgh and Vayanos (2011) "ESBies: A Realistic Reform of Europe's Financial Architecture" In: The Future of Banking: A VoxEu.org Book, edited by Thorsten Beck, 15-20, October 2011
  8. Brunnermeier, Langfeld, Pagano, Reis, van Nieuwerburgh and Vayanos (2017) "ESBies: Safety in the Tranches," Economic Policy 32, 177-219.
  9. Oh, H, and R. Reis (2011) "Targeted Transfers and the Fiscal Response to the Great Recession," Journal of Monetary Economics, 59, S50-S64 doi:10.1016/j.jmoneco.2012.10.025
  10. McKay, A. and R. Reis (2011) "The Role of Automatic Stabilizers in the U.S. Business Cycle," NBER working paper 16775 doi:10.3386/w19000
  11. Reis, R. (2013) "The Mystique Surrounding the Central Bank's Balance Sheet, Applied to the European Crisis" American Economic Review, 103 (3), 135–40 doi:10.1257/aer.103.3.135
  12. Hall R. and R. Reis (2013) "Maintaining Central-Bank Solvency under New-Style Central Banking"
  13. R. Reis (2013) "The Portuguese Slump and Crash and the Euro Crisis," Brookings Papers on Economic Activity, 46, 143-193 doi:10.1353/eca.2013.0005
  14. R. Reis (2016) "Funding Quantitative Easing to Target Inflation," Designing Resilient Monetary Policy Frameworks for the Future, Jackson Hole Economic Policy Symposium: Federal Reserve Bank of Kansas City, August 2016
  15. McKay, A. and R. Reis (2011) "The Role of Automatic Stabilizers in the U.S. Business Cycle," NBER working paper 16775 doi:10.3386/w19000.
  • Official website at the LSE
  • The Phillips lecture
  • Roberts, Russ (April 27, 2009). "Reis on Keynes, Macroeconomics, and Monetary Policy". EconTalk. Library of Economics and Liberty.
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