Lecture | Lucrezia Reichlin: “The Art and Science of Patience: Relative Prices and Inflation” | November 9

The Paris School of Economics is glad to invite you to a lecture by Lucrezia Reichlin (London Business School) organized by the International Macroeconomics Chair.

The lecture will take place at the Paris School of Economics and will be followed by a conversation with Hervé Le Bihan, Deputy Director Macroeconomic Analysis and Forecasting at the Banque de France, and a discussion with the audience.

• Date: November 9, 2023 ; 2pm-3:30pm
• Venue: Paris School of Economics
  48 bd Jourdan, 75014 Paris, Daniel Cohen Amphitheater

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The Art and Science of Patience: Relative prices and inflation

Following more than thirty years of low inflation, advanced economies saw a surge in inflation driven by an unprecedented concomitance of factors linked to the Covid-19 pandemic and the Russian invasion of Ukraine. In her lecture that builds on the most recent Geneva Report on the World Economy, Lucrezia Reichlin takes stock of what has happened, including the monetary policy response in the euro area and the US, and discusses the challenges ahead.

The report, co-authored with Veronica Guerrieri, Michala Marcussen and Silvana Tenreyro, shows how supply chain disruptions and demand changes induced by the pandemic and the increase in commodity prices hit different sectors with variable intensity, prompting a large shift in relative prices and a slow but persistent response of core inflation. The authors develop a model to show that, whenever nominal rigidities prevent sectoral relative prices to adjust fully in response to an energy shock, production is reallocated across sectors less quickly than in a setting with flexible prices. While highlighting the costs and risks associated with different monetary policy choices, the report suggests that de-anchoring risks are limited. When an economy with nominal rigidities is hit by an uneven shock, it may be necessary to be patient and tolerate somewhat higher inflation to facilitate the relative price adjustment and the efficient allocation of resources across sectors.

Lucrezia Reichlin

Lucrezia Reichlin is Professor of Economics at the London Business School, a trustee of the Center of European Policy Research (CEPR) and of the International Financial Reporting Standards (IFRS) Foundation. She is a columnist for the Italian national daily Il Corriere della Sera and a regular contributor of Project Syndicate.

She received a Ph.D. in Economics from New York University. From 2005 to 2008 she was the Director General of Research at the European Central Bank. She was previously a professor at the Université Libre de Bruxelles. From 2013 to 2016 she was Chair of the Scientific Council at the think-tank Bruegel. She is a Fellow of the Econometric Society, the British Academy and the European Economic Association. She is an Honorary Fellow of the American Economic Association. She is on the advisory board of several research and policy institutions around the world and she is a non-executive director of several commercial boards.

This event is organized by the International Macroeconomics Chair, which is the result of a partnership between the Banque de France and PSE. Sharing the same vision about scientific needs on international issues, these two organisations joint their efforts to build a chair with the objective of fostering the development of research on the financial & monetary international system, and in international Macroeconomics.