Also, if interested in the topic see the nice related job market paper of Pedro Martinez-Bruera (@pmbruera) and coauthors (Pedro is on the market this year)

7/7 Bottom line 🎯 Central banks with high reputation can “look through” shocks supply while those without are forced to act aggressively in order to maintain reputation. 📄

6/7 Fitting the model to Brazil: • Low-credibility banks must “overshoot” with rate hikes to anchor expectations. • As reputation rises, expectations stabilize. • The same price stability can then be achieved with milder moves — a reputation dividend.

5/7 We use high-frequency identification around policy meetings to measure this elasticity. 🇧🇷 Brazil stands out: 📉 A 1 pp surprise increase in the Selic rate lowers 5y5y inflation compensation by 0.48 pp and survey expectations 4 years ahead by 0.18 pp.

4/7 Here’s where data come in. In our model, the strength of the reputation channel is governed by how long-run inflation expectations respond to monetary surprises. The larger this sensitivity, the stronger the incentive to build credibility through policy.

3/7 When the central bank’s “type” is uncertain, rate hikes aren’t just about inflation—they’re a signal. After supply shocks, it may tighten more and accept short-run pain to prove toughness. 💡 This reputation channel can push rates much higher than if its type were known.

2/7 In our model, firms and households learn the central bank’s type — Hawk or Dove — from its actions. A Hawk defends the inflation target. A Dove tolerates more inflation to protect output. ➡️ Reputation is endogenous and shapes the inflation–output trade-off.

1/7 When inflation spiked after COVID, some central banks hiked early (🇧🇷 Brazil), warning about “de-anchoring risk”. Others waited. Our paper asks: 👉 How does credibility shape monetary policy when reputation itself must be built and preserved?

New thread 👇 on how reputation and credibility shape central bank decisions during inflation shocks — and why some countries hiked early while others waited. From our new paper: 📄 Monetary Policy without an Anchor — Bocola, Dovis, Jørgensen & Kirpalani (2025)

Credible central banks can fight inflation with smaller rate hikes — a "reputation dividend". New research combines theory and bond-market evidence to measure its size, from @luigi_bocola, Alessandro Dovis, Kasper Jørgensen, and Rishabh Kirpalani https://t.co/tQPE4LOOSC

Celebrating the 70 years birthday of one of the most brilliant economists, Nobu Kiyotaki, at @Princeton . Many friends, ideas and memories

Per chi e' interessato, qui viene spiegata la formula usata per calcolare i dazi reciproci https://t.co/VPRCbLEkFX

Per fare un’analogia, e’ come e' come se la ragione per cui abbiamo un "deficit commerciale" con il nostro macellaio sia dovuta esclusivamente a dei dazi immaginari che il macellaio ci sta imponendo, e non al fatto che ci piace la carne. @Corriere, che dici, lo cambiamo?

Ergo, se l’Europa esporta verso gli Stati Uniti piu’ di quanto gli Stati Uniti importino, deve essere che l’Europa sta imponendo dei dazi verso gli USA. Ovviamente, questa cosa e’ geniale dal punto di vista mediatico, ma non ha molto senso.

Questo 39% e’ calcolato usando una (forse troppo?) semplice formula economica. Senza entrare nei dettagli, l’assunzione principale e’ che se gli Stati Uniti hanno un deficit commerciale con un paese, allora quel paese sta imponendo dei dazi nei confronti verso gli Stati Uniti.

Sul @Corriere i dazi di Trump vengono spiegati in questo modo. Messa cosi’, Trump sembra quasi un signore: ci fa pagare la meta’ di quanto facciamo pagare noi a lui! Le cose pero' non stanno cosi': l’Unione Europea non impone dazi al 39% sugli Stati Uniti. (Thread breve)

Conversazione molto interessante. Le forze politiche italiane dovrebbero discutere di questi temi invece di prendere posizioni dettate da logiche da stadio (pro/contro Milei). Potrebbe diventare la legislatura piu' popolare (e non populista) della storia repubblicana

Happy birthday @CREIResearch !!!

On Fiscal Dominance, a classic is Sargent-Wallace "Unpleasant Monetarist Arithmetic" in the QR. In this QR note I celebrate and revisit it. I show their spectacular example relies on being on the wrong side of a Laffer curve. I offer a variant that strengthens their conclusions.

The road to hell is paved with superbonus