ECO Seminar/Webinar – Bartosz Maćkowiak

february, 2023

03feb13:0014:00ECO Seminar/Webinar - Bartosz Maćkowiak


Event Details

CEF.UP – ECO Seminar/Webinar

Friday – February 3rd, 2023, at 1:00 p.m. |Room 305| Online


Gambling to Preserve Price (and Fiscal) Stability


Bartosz Maćkowiak – European Central Bank and CEPR (joint work with Giancarlo Corsetti)



“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).”




(Friday) 13:00 - 14:00

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