Spring 2024 Alumni Newsletter

SPRING 2024

the spring semester draws to a close, I’d like to thank all who
As
contributed to our department’s success this past academic
have
begin, we had an excellent year in recruiting new faculty.
To
Castro-Pires will be joining the department as an
Henrique
professor. He is presently at the University of Surrey in
assistant
United Kingdom and earned his Ph.D. from Northwestern
the
in 2022. His core area of research is in business
University
and industrial organization. Chad Kendall will be joining
strategy
department as an associate professor. He is presently at the
the
of Southern California and earned his Ph.D. from the
University
of British Columbia in 2014. His core area of research
University
in political economy and behavioral finance. Professor Castro-
is
and Professor Kendall each bring an impressive set research
Pires
teaching credentials to the University of Miami. We are
and
one can appreciate, there are many moving parts that go into
As
talent. I’d like to thank our recruiting committee, headed
recruiting
Professor Noah Williams, as well as other members of our
by
our Ph.D. students, and staff for their efforts. I’d also like to
faculty,
Interim Dean Olazábal and Vice-Dean Nanda for their
thank
and support. Finally, I’d like to thank the many people in
leadership
Office of the Provost for their administrative support. These
the
are largely unseen by those on the outside and so I’d like to
efforts
LETTER FROM THE
CHAIR
Greetings to all 'Canes near and far!
year and report on some of our main achievements.
excited to have them as colleagues!
acknowledge them here. Thank you all!

In addition to research and teaching, the Economics Department is
committed to serving the community by hosting public events
featuring prominent policy makers and academics discussing
important policy issues. We held two major events this spring.
On February 2, 2024, we hosted a conference entitled “Argentina
in Transition.” This event brought several leading Latin American
academics to discuss President Javier Milei’s radical proposals to
combat Argentina’s raging inflation. The conference was the
brainchild of Allan Herbert who co-organized the event with
Manuel Santos and Alex Horenstein.
On April 2, 2024, we hosted the annual Henry Family Endowed
Speakers Series featuring James Bullard, former president and
CEO of the Federal Reserve Bank of St. Louis and current Dean of
the Mitchell E. Daniels, Jr. Business School at Purdue University,
whose public lecture was entitled “Can the Fed Stick the Soft
Landing?” You can learn about these events and more on the
pages that follow. Let us know if you have anything you’d like to
share with our community in our future newsletters. Also, please
feel free to reach out if you or your organization need speakers for
your events, or if you’d just like to learn more about our plans. We
have several exciting ideas on the table and we’re looking for
partners.

Meet Our Faculty
David Andolfatto
Michael B. Connolly,
Hugo Faria,
Stefania Albanesi,
Professor
Professor & Chair
Professor
Lecturer
Alex R. Horenstein,
Miguel Iraola,
Rong Hai,
Daniel Hicks,
Associate Professor
Assistant Professor
Lecturer
Associate Professor of
Professional Practice
Ricardo V. Lago,
Luis Locay,
Ayca Kaya,
David L. Kelly,
Associate Professor
Associate Professor
Professor
Lecturer

Meet Our Faculty
Lorca,
Maria
Lecturer
Morfov,
Stanimir
Lecturer
Nelson,
Augustine
Lecturer
Parmeter,
Christopher
Professor
Associate
Petruzzello,
Esteban
Professor of
Assistant
Santos,
Manuel
Professor
F. Spigelman,
David
Lecturer
Senior
Williams,
Noah
Professor
Professional Practice
Wright, Ian
Professor
Assistant
Castro-Pires,
Henrique
Professor
Assistant
Kendall,
Chad
Professor
Associate
Valdivia,
Daniela
Manager
Office

Welcome to our department!
Introducing our New Faculty
Chad Kendall
Chad Kendall is an applied microeconomist
who specializes in political economy and
behavioral economics. He is particularly
interested in financial markets and voting
mechanisms, and in the roles that
information and bounded rationality play in
the functioning of these institutions. His
work has been published in top leading
journals including Econometrica and the
American Economic Review.
Henrique Castro Pires
Henrique Castro-Pires received his Ph.D. in
Managerial Economics and Strategy from the
Kellogg School of Management, Northwestern
University, in 2022. Upon graduation, he worked
as an Assistant Professor of Economics at the
University of Surrey for two years. His research
interests lie in the field of microeconomic theory,
including mechanism design, organizational
economics, and personnel economics. His recent
research has focused on the design of incentive
schemes, subjective performance evaluations,
and how compensation schemes affect the
selection of workers who join a given firm or
organization. His work has been published in top
journals in the field, including the American
Economic Review, the Journal of the European
Economic Association, and the Games and
Economic Behavior.

OF
CELEBRATION
EXCELLENCE
HERBERT BUSINESS SCHOOL SELECTED
MIAMI
STUDENTS TO RECEIVE THIS YEAR’S
THESE
EXCELLENCE AWARDS
SEBASTIAN CASTILLO
DAVID MICHAEL ALLEN
Outstanding Student in the
Most
Economics major
Quantitative
Outstanding Student in the
Most
Economics major award
Political
award
Congratulations!

A R G E N T I N A I N T R A N S I T I O N
C O N F E R E N C E

February 2nd, Miami
On
Business School
Herbert
the "Argentina in
hosted
forum, an
Transition"
event
enlightening
by the Pan-
organized
Economic
American
Institute. The
Research
brought together a
forum
panel of
distinguished
and
economists
to analyze
policymakers
economic
Argentina's
and explore the
challenges
new direction charted
bold
President Javier Milei.
by

Allan Herbert, a co-organizer and major
Dr.
to the event, commenced with the
contributor
remarks highlighting the libertarian nature of
opening
new Argentinean President.
the
forum featured presentations from esteemed
The
including Dr. Felicia Knaul from the
speakers,
of Miami, Dr. Fernando Alvarez from the
University
of Chicago, Dr. Sebastian Galiani from the
University
of Maryland, Dr. Federico Sturzenegger
University
the University of San Andrés and Harvard
from
School, Dr. Martin Uribe from Columbia
Kennedy
Dr. Alejandro Werner from Georgetown
University,
and Dr. Ivan Werning from MIT. The event
University,
co-moderated and co-organized by Dr. Manuel
was
and Dr. Alex Horenstein from the Economics
Santos
at Miami Herbert Business School.
Department
forum drew a diverse audience, spanning
The
professors, and influential figures such as
students,
of Miami trustee and benefactor Stuart
University
Argentinean Consul Martin Horacio Romero,
Miller,
Edgardo Defortuna, and Founder Carlos
CEO
underscoring the broad interest in and
Rosso,
Sturzenegger, a key figure behind President
Dr.
economic plan, shared an insightful anecdote
Milei's
the presidential chef's retirement after 30
about
The chef's observation that "the presidents
years.
all the time, but the dinner guests were
changed
the same" highlighted the perceived stability
always
Sturzenegger critiqued this "impoverishing model,"
Dr.
that it benefits only certain syndicalists and
arguing
a notion that underpins President Milei's
businessmen,
program aimed at dismantling the financial
deregulation
forum also addressed President Milei's repeal of
The
controls on cable, internet, and cellular services.
price
Sturzenegger, drawing from his experience as
Dr.
president of the Central Bank, emphasized the
former
for political courage to implement economic
need
reforms.
experts provided valuable insights. Dr. Werner,
Other
on his experience negotiating with the Macri
reflecting
and the IMF, depicted a challenging history
government
Argentina's economic interactions with the
of
In a poignant comment that highlights
institution.
history of serial default on its debt,
Argentina’s
Ricardo Lago (Economics Department)
Professor
to Argentina as "the Vietnam of the IMF" due
referred
Galiani compared President Milei's challenges to
Dr.
faced by former President Macri, stressing the
those
of governing under the constant threat of
difficulty
populism.
Álvarez argued for a middle ground between
Dr.
and free-floating exchange rates, while Dr.
dollarization
critiqued the government's handling of currency
Uribe
controls.
Werning saw the
Dr.
moment as a
current
opportunity,
significant
young people
with
convinced of
particularly
need for change.
the
he cautioned
However,
the interaction
that
economics and
between
in Argentina
politics
a challenge,
remains
that stabilization
and
does not
alone
growth.
guarantee
underpinnings of this entrenched status quo.
to its tumultuous financial history.
relevance of the topic.
amid Argentina's political volatility.

Argentina in Transition
The
served as a platform
forum
success of President
The
program will hinge
Milei's
leading economists to
for
and debate the
scrutinize
his ability to swiftly
on
the economy,
stabilize
impact of the Milei
potential
economic plan.
government's
support for
garner
reforms, and lay
structural
the speakers
While
diverse proposals,
presented
groundwork for
the
growth. As Dr.
sustainable
was a shared
there
that Argentina
understanding
pointed out,
Sturzenegger
victories have been
no
at a pivotal moment.
stands
Milei's
President
yet, and the battle
won
the corporate state
against
has a unique
administration
to break with the
opportunity
be a protracted and
will
process with
challenging
and chart a new path,
past
it also faces substantial
but
and progress.
setbacks
with clear goals
However,
in navigating the
hurdles
interplay of
intricate
perseverance, there is
and
that Argentina
optimism
economics and politics.
finally escape its cycle
can
stagnation and crisis.
of

VIENNA MACRO
CONFERENCE

years ago, Professors Gabriel Lee
Twenty
at the University of Regensburg) and
(presently
Gervais (presently at the University of
Martin
and Andolfatto were awarded a grant
Georgia)
the Austrian National Bank to host a
from
conference at the Institute of
macroeconomics
were so impressed with the quality of
People
presentations, the ambience of the city, and
the
camaraderie that arose from the group, that
the
demanded they continue to host it on an
they
basis. They have held the conference
annual
year since then apart from an interruption
every
can check out the conference website here
You
Vienna Macro Conference) where, among
(
things, you will find a record of paper
other
and where the papers were
presentations
published (most found their way into
ultimately
academic journals).
top
of the conference’s regular attendees is
One
Waller, presently serving as a
Christopher
on the Board of Governors of the U.S.
Governor
Reserve System. Participants were so
Federal
in awe of Chris’ penetrating comments and
much
that we established a prize in his name
criticisms
is awarded every year to the conference’s
that
and most constructive critic.
best
2016, Chris suggested organizing a spring
In
of the Vienna conference with the idea of
version
the unique experience to other parts of
exporting
globe. The Vienna Global Macro workshop
the
so far been held in Abu Dhabi, Marrakech,
has
and London. The event this year in Miami
Prague,
thanks to Blanca Ripoll, Jillian Garcia,
Special
Hernandez, Nicholas Cozzi, Jose Sosa,
Eduardo
Valdivia, Shelsie Moncada and Chris
Daniela
for their expert handling of conference
Campos
We’d also like to thank the Department
logistics.
Finance at Miami Herbert for helping to host
of
Conference Organizers: Gabriel Lee, Martin Gervais and David Andolfatto
Advanced Studies in Vienna.
caused by the global pandemic.
was, as expected, a tremendous success.
our conference dinner event.

The Henry Family Endowed
“CAN THE FED STICK THE SOFT LANDING?”
Speakers Series in Economics
JAMES BULLARD
Former CEO and 12th President of Federal Reserve Bank of St. Louis
On April 2, 2024, the Economics Department was pleased to have former St. Louis Fed
CEO & President Jim Bullard deliver a public talk on a question that is on many peoples’
mind: Can the Fed Stick the Soft Landing? Bullard argued that relative to a famous
protocol for setting interest rates (known as the Taylor Rule), the Fed was too late in
raising its policy rate in 2021 and is now too slow in cutting its policy rate in 2024.
Overly tight monetary conditions increase the risk of policy-induced recession, turning
the soft-landing into a hard-landing. A lively Q&A followed his talk.
The talk can be viewed here: Former Fed exec advocates for lower interest rates

Kelly, Alex Horenstein, David Andolfatto, James Bullard,
David
Natarajan, Noah Williams
Harihara
Diana Skorokohd, Zander Iacono, Dakota Garden,
Students:
Garcia. Faculty: Ricardo Lago
Federico
David Andolfatto, James Bullard, Interim Dean Ann Olazábal
James Bullard, Scott Barkow

LATAM region, excluding Brazil, is
The
to grow at half the pace of the rest
expected
developing counties. There is a bright spot
of
the nearshoring of North
nevertheless:
supply chains from Asia to LATAM.
American
with market-friendly governments
Countries
free-trade agreements with US-Canada
and
succeed at attracting those supply
will
For Mexico , the central question is
chains.
the coming elections will deliver
whether
a government. For Argentina, in turn,
such
question is whether the ambitious
the
reforms of President Milei will be
economic
to mobilize support from Congress.
able
COUNCIL OF THE
AMERICAS
PROFESSOR RICARDO LAGO
On December 15, Professor Ricardo Lago
gave the keynote address to the annual CFO
meeting of the Council of the Americas. The
topic was “USA and Latin America in the
unfolding world economic outlook.”
Forecasters had predicted that the inflation
fight would tip the U.S. economy into
recession. But as in Samuel Beckett’s
“Waiting for Godot” there is no sign of it yet.
In the rest of the world, however, economies
are in general not faring well. Only India and
Brazil show some dynamism. Moreover,
financial and geopolitical risks tilt forecasts to
the downside.

7th Annual CSO Summit &
Symposium
By: Dr. Daniel Hicks
The 7th Annual Chief Sustainability Officer Summit
& Symposium (CSOSS), presented by Calamos
Investments, addressed topics associated with
global reporting aligned, ESG investing and
sustainable real estate.
A summit of chief sustainability officers highlights
the morning sessions. CSOSS is hosted by Miami
Herbert Business School and the Department of
Economics, in partnership with the University of
Miami’s Rosenstiel School of Marine, Atmospheric,
and Earth Science and the College of Engineering.
Florida’s premier networking event in sustainable
business.
CSOSS attracts corporate executives from every
economic sector, sustainability professionals from across
industries, investment managers, government
policymakers, NGO and community leaders, distinguished
researchers and international students from a range of
academic disciplines.
CSOSS organizers want to thank its generous sponsors,
Calamos Investments and Universal Insurance Holdings,
Inc. for their support.
The theme of the conference is "Building Consensus in an
Election Year.” The event was held on April 5 at the
university’s new Lakeside Auditorium & Pavilion in Coral
Gables, Florida.

Your coauthor In-Koo Cho
DA:
visited our department and
recently
a paper the two of you
presented
apparently been working on for
have
The title of the paper was
years.
Outcomes Without
"Collusive
Algorithmic Pricing in a
Collusion:
Model." I recall feeling
Duopoly
and perhaps even a little
surprised
by the results he
astonished
I thought it'd be interesting
reported.
follow up on In-Koo's presentation
to
ask you to provide your take on
and
paper. Let me begin by asking
the
Thanks for the question. First,
NW:
bit of context. There is a long
a
in economics looking the
literature
of collusion be firms in
possibility
where they have some
markets
power. Most obvious, and
pricing
illegal, is for firms to enter
clearly
an agreement to set prices
into
than they would in a
higher
setting.
competitive
driving up prices, firms can earn
By
profits. But there is an incentive
more
any one firm to undercut its
for
– cut prices just a bit,
competitors
earn profits on each item sold,
still
capture more of the market and
but
increase total profits. So any
so
agreement must have a
collusive
of punishment to prevent a firm
form
defecting on this collusion.
from
I mentioned that explicit
Now,
agreements are illegal, but
collusive
are myriad ways that firms
there
potentially collude implicitly.
could
example, suppose you and you
For
I are the only suppliers in a
and
and we’ll both be around for
market,
long time as the only suppliers.
a
you move first and set your
Suppose
at a high level. Then while I
price
be tempted to undercut you, I
would
know that in response you’ll
may
me by dropping your price
undercut
below what I set. My
substantially
gain is offset by future
short-term
and so I may rather decide to
losses,
your high price. Even though
match
have not explicitly agreed to
we
the threat of punishment
anything,
mean that collusion can arise as
may
these basic issues have been
While
for a long time, they’ve gained
around
prominence in modern, datarich
new
markets, where an increasing
of firms have turned to
number
pricing algorithms. These
automated
observe market conditions
algorithms
can quite rapidly adjust prices in
and
to the outcomes that they
response
An important question
observe.
both economists, regulators,
facing
policymakers is whether these
and
can learn to collude, and if
algorithms
what should be done about it.
so,
particular background which
The
our paper – although as you
sparked
we’d been working on
mentioned,
ideas for a long time – was a
related
of papers finding that collusive
series
of higher prices could
outcomes
from the interaction of
emerge
algorithms. This work, which
pricing
based on simulations, provided
was
intuitive explanation suggesting
some
the algorithms had ``learned to
that
In-Koo and I wanted to
collude.’’
this in more detail, to
explore
the forces at play in the
understand
of pricing algorithms, and
interaction
characterize precisely and
to
what we could expect in
theoretically
settings.
such
Alright then. Well, it seems to
DA:
that, in the environment you
me
That was our intention. In
NW:
to study the possibility of the
order
of collusive outcomes,
emergence
studied an extreme
we
Dr. Noah Williams on the
Collusion Illusion
Interviewed by David Andolfatto
what this paper is about.
an outcome.
it should be close to
study,
for collusion or collusive-
impossible
like behavior to emerge, no?
where we intentionally
environment
down all of the known
shut
that would facilitate
avenues
collusion.

whose algorithms are only
maximizers
on a few pieces of
dependent
(current prices in the market
information
realized profits), and who act,
and
and set prices independently.
update,
for example that this rules out the
Notice
strategies I discussed
punishment
– the firms in our setting only
earlier
current profits, not possible
consider
losses. That is not to say that
future
other forces are not important – in
these
settings, they may indeed be
particular
relevant. But we wanted to show
highly
collusive outcomes could arise
that
in the absence of the wellunderstood
even
channels that may facilitate
information, firms are
endogenous
about market outcomes
learning
at the same time setting prices
while
determine market outcomes.
which
to a cartel level, at
increases
point they stop increasing
which
But then firms are no
prices.
moving prices in tandem,
longer
the separate shocks to the
so
firms breaks the
different
and firms start to
coordination,
each other. As I said, we
undercut
all of this analytically,
characterize
show that collusive episodes
and
a recurrent feature of the
are
environment.
Very interesting. Have you
DA:
about what implications for
thought
some settings policymakers may
In
more information, such as the
have
information about the
inside
itself which may warrant
algorithm
Dr. Noah Williams on the
Collusion Illusion
Interviewed by David Andolfatto
studied the interactions of two firms
We
were static, myopic profit
who
logic of the model is that
The
though firms are acting
even
most direct implication is that our
The
provide a challenge for
results
and subject to
independently
noise, just by chance
random
policy. As I alluded to at
competition
outset, there has been a lot of
the
experience shocks
occasionally
move their prices in the
which
by lawmakers and regulators
interest
not just in the U.S. but globally –
–
direction. Firms are
same
updating and are
continually
are seeking policy reforms to
who
competition in markets with
enhance
to incoming information,
reactive
so their pricing algorithms will
and
pricing. But we show that
algorithmic
price increases to
coordinated
that the jointly higher prices
see
to higher profits, and so will
led
levels in markets populated
collusive
algorithmic price setters cannot
by
prices further. In our
increase
this generates rapid price
model,
be used as evidence of
alone
collusion.
collusion.
our model, the market experiences
In
episodes where both firms
recurrent
action. But even if outcomes
legal
highly collusive, an outsider
appear
prices at collusive levels, followed
set
a period of price-cutting and
by
conclude that a firm learns to
cannot
via an algorithm. We are also
collude
to competitive prices. We
reversion
characterize the dynamics
analytically
looking at how the frequency of
now
episodes depends on the
collusive
the model to explain the recurrent
of
of collusive outcomes. The
episodes
of the market
characteristics
In general, we find that
environment.
to our results is the combination
key
strategic complementarity, as both
of
outcomes are more
collusive
in more concentrated
common
get higher profits when they set
firms
at higher levels, and
prices
Our thus highlights a new
settings.
of market concentration.
drawback
policy your paper provides?

PROFESSOR IRAOLA TRAVELS TO
SPAIN WITH 29 STUDENTS
Globe 2024 program in Spain, March 3-12, 2024
As part of the Globe 2024 program, last spring break Dr. Miguel A.
Iraola led an experiential learning course in Spain. Twenty-nine
Miami Herbert Business School graduate students (mainly from the
Master of International Business) participated in this program
visiting Madrid and Barcelona for nine days. Students were able to
immerse in the Spanish culture and deepen their knowledge of
main economic challenges and opportunities in Spain. The program
included several cultural activities and visits to historic sites. For
instance, the students attended a flamenco show and visited
emblematic historic sites like the Madrid City Hall, Sagrada Familia
in Barcelona, and Bodegas Codorníu, a winery with over 400 years
of experience.
The academic part of the program involved company visits and
presentations covering various economic sectors, including
finance, retail, consulting, professional soccer, and the food
industry. One of the most successful activities was the meeting
with Sheila Boudount and Pau Aragay from Marinva. This is a
Barcelona based company specialized in the use of games for
trainings and the transformation of teams and organizations. The
students had the opportunity of participating in several games
highlighting the potential of play-based trainings.

inflation and interest rate environment has a significant impact on American
The
and businesses. In the decade prior to 2020, both inflation and interest rates
households
low relative to their levels in the preceding five decades. The Covid-19
remained
and its associated policy responses have jolted us out of that environment.
pandemic
February 2021 to June 2022, the PCE inflation rate rose from just under 2% to just
From
7%. While inflation has declined sharply from its peak in the summer of 2022, it
over
elevated relative to target, and interest rates remain elevated relative to recent
remains
It is natural to wonder where we are heading. Will we return to the low-inflation,
norms.
rate environment prevailing prior to the pandemic? Or have we entered a new
low-interest
regime?
course, no one can know the answer to this question with any degree of certainty.
Of
I believe it is possible to identify broad structural forces that may make it more or
Nevertheless,
difficult for U.S. monetary policy makers to fulfill their congressional mandates of low
less
full employment, and moderate long-term interest rates. Read more here
inflation,
financial market watchers will know that interest rates have been in secular
Seasoned
since 1980. But if go back even further, we see the recent low-interest environment
decline
not an anomaly. The truly striking departure from history was the long “peace time
is
over the period 1965 - 1980. The secular decline in interest rates since 1980
inflation”
Whither U.S. Inflation & Interest Rates?
)
Conducting Monetary Policy
(
Some History
might in some way be seen as a prolonged period of normalization; see Figure 1.
Figure 1

An interpretation of events 1951-2019
From the Treasury-Fed accord in 1951 up to the early 1960s, federal government
deficits remained low and monetary policy remained relatively tight. Persistent peacetime
budget deficits first appeared during the Kennedy-Johnson administrations in the
early 1960 and proceeded unabated until the Clinton surpluses in late 1990s. A
relatively loose monetary-fiscal policy mix combined with two severe oil price shocks in
1973-74, 1979-80 conspired to produce secular inflation.
In response to high and persistent inflation, the Federal Reserve tightened monetary
policy which, together with an oil price shock associated with the Iran-Iraq war, produced
a severe recessionary episode from 1980-82. The recession along with President
Reagan’s famous 1981 tax cut produced ever larger fiscal deficits fueled, in part, by the
Fed’s high interest rate policy.
The following figure shows the rate of growth of the U.S. federal debt. Note how the
pace of issuance accelerates in the 1960s and then decelerates in the 1980s and
1990s. This pattern roughly tracks the secular rise and fall in the interest rate, displayed
in Figure 1.
Figure 2
8

2000 onward, the U.S. debt continued to grow at an historically rapid pace. Despite
From
growing debt, inflation remained low and long-term interest rates continued their
the
answer is that the domestic and global demand for U.S. Treasury securities (USTs)
One
rapidly over this period of time. There were several forces driving this demand. First, a
grew
growth in the demand for USTs for use as collateral in credit derivative and repo
secular
began in the 1970s. Second, many emerging countries began to load up on USTs
markets
safe stores of value, especially after experiencing or witnessing several financial crises.
as
Asian financial crisis of 1997, for example, motivated China’s rapid accumulation of
The
The Chinese demand for USTs was accommodated by China’s entry into the World
USTs.
Organization in 2000. In effect, China exported cheap goods and services (a
Trade
demand for USTs continued to grow, spurred on by events like the 2008-09 financial
The
which saw the evaporation of a large supply of private-label safe assets, leaving
crisis,
seeking safe havens to reach for USTs. In the aftermath of the financial crisis, a
those
of important regulatory reforms (e.g., Basel III and Dodd-Frank) contributed to a
number
demand for USTs. More recently, the establishment of the Fed’s Standing Repo
regulatory
and the FIMA repo facility permit UST holders to borrow USD using USTs as
Facility
further enhancing the attractiveness of USTs. Together, these developments
collateral,
to a secular deflationary force in the United States. The downward pressure on
contributed
upshot of this interpretation of U.S. interest rates and inflation is that while the supply
The
USTs (deficit) matters, so does the domestic and foreign demand for USTs. To infer the
of
path of interest rates and inflation in the future, it will be important to account for the
likely
likely to impinge on the future supply of and demand for USTs.
forces
March 2020, parts of the economy were shut down to “flatten the contagion curve.” The
In
emergency lending facilities stabilized financial markets and the CARES Act (with
Fed’s
from the Federal Reserve) injected close to $2.5 trillion (10% GDP) of support
support
targeting mainly to those who needed the money. Although these support
payments
could have been designed better, they were obviously necessary and desirable.
payments
while there was good reason to believe that the policy would drive up the cost of
And
I explained in the Fall of 2020 how inflation was an unfortunate byproduct of a
living,
policy financed by printing money instead of raising tax rates and/or interest
redistribution
The alternative methods of financing the necessary transfers would likely have
rates.
even more pain on the economy, primarily though a persistently higher rate of
afflicted
secular decline. How was this possible?
disinflationary force) to the United States in exchange for USTs.
interest rates and inflation were largely offset by an accommodating fiscal policy.
Events since 2019
unemployment.

early 2021, anticipating the ARP (which turned out to be another $2.5 trillion
In
program), I remember telling a reporter that “we’ll either have inflation, or
spending
have the biggest free lunch ever.” We got the inflation, although it turned out to
we’ll
much higher and be much more persistent than I expected. Of course, not many
go
were expecting Russia to invade Ukraine in early 2022—an event that drove
people
to its peak in the summer of 2022. Throughout the entire episode, however, I
inflation
to maintain that inflation was “transitory” in the sense that I expected the
continued
rate of inflation to decline over time barring any further events. While the
elevated
monetary policy tightening beginning mid-2022 almost surely accelerated the
Fed’s
I believe inflation would have largely declined on its own even in the
disinflation,
of Fed tightening. My rationale for believing this was that the large monetaryfiscal
absence
actions of 2020-2021 were temporary and that the Covid-19 induced supply
were temporary as well. Barring the emergence of some hypothetical
disruptions
spiral, I could not see what forces might have maintained a persistently
wage-price
the Henry Family Endowed Speakers Series held at the University of Miami on April
In
2024, former St. Louis Fed president Jim Bullard made the case for why the Fed
2,
consider cutting its policy rate to stick the “soft landing” (i.e., bring inflation back
should
to the Fed’s 2% target without inducing a major recession). Bullard has a record
down
consistently making the right calls. But with all due respect to my former boss, I’m not
of
sanguine as he appears to be on this matter. Since last year I have worried that
as
was not likely to head back to 2% any time soon. Or, if it did, I did not see it
inflation
there for long. What is the rationale for this view?
staying
commentators appear to believe that we’re on a path that will bring us back to the
Many
low-interest era prevailing in the decade prior to the Covid-19 pandemic.
low-inflation,
of this writing, the market believes the Fed will cut its policy rate three times in
As
This forecast is based on the expectation that inflation will soon reach its 2%
2024.
me first consider the near-term outlook. To, the unemployment rate through early
Let
has remained below 4% and there are few signs of recession (which are, in any
2024
difficult to forecast). Second, the PCE inflation rate (the Fed’s official measure)
case,
been stuck at around 2.5% on a year-over-year basis. Third, the Fed has no recent
has
of cutting its policy rate absent any signs of an impending recession. With
history
remaining still above target and no signs of recession, the Fed is more likely to
inflation
high rate of inflation.
Whither U.S. inflation and interest rates?
target. While this outcome is not by any means inconceivable, I think it’s unlikely.
its policy rate elevated until officials are comfortable that inflation remains
keep
at or near the 2% target.
anchored
8

the longer-term outlook is more troubling. It seems naïve to believe
Unfortunately,
we are poised to return to a pre-pandemic world with the deflationary forces
that
above. The most important global development has been an emergent
outlined
first nation capable of challenging U.S. military power since the
China—the
of the Soviet Union in 1991. A potential clash over Taiwan is a concern.
collapse
other nations, notably Russia and Iran, are contributing to the recent
Several
thing we know from history is wars--even cold wars and proxy wars--
One
resources and challenge federal treasuries. On top of military needs are
consume
perennial demands for federal spending on domestic initiatives. Neither of the
the
major candidates contending for the U.S. presidential election this November
two
likely to raise tax rates significantly. If so, then the only other option will be to
are
the pace of U.S. Treasury security issuance. Domestic and global
increase
will either absorb the added supply—which is likely to drive longer-term
markets
rates higher—or the Fed will be compelled to purchase USTs to cap the
interest
similar scenario prevailed for the U.S. in the 1960s—the cold war with the
A
Union, a costly proxy war in Vietnam, along with President Johnson’s Great
Soviet
programs—all contributed to growing fiscal pressures. Geopolitical
Society
in the Middle East spawned two great energy price shocks in the 1970s.
tensions
countervailing force this time around is the massive global demand for U.S.
A
securities. Which of these forces is likely to prevail is difficult to predict.
Treasury
indeed, I am making no predictions. What I am describing here is just one of
And,
many possible scenarios that may unfold over time. Because the scenario is
the
to have far-reaching consequences and because it is not at all implausible,
likely
makers need to prepare themselves for this contingency.
policy
escalation of geopolitical tensions.
interest rate—an action that is likely to drive inflation higher.
David Andolfatto

Maria Lorca-Susino and Dr.
Dr.
Acevedo study the
Rafael
between economic
correlation
and freedom in their
growth
paper titled “The shortrun
research
consequences of the erosion
by the Economic
published
for Latin America
Commission
Caribbean countries of the
and
Nations (CEPAL No.140).
United
to the authors, “our
According
experience as it
personal
to the importance of
translates
growth has always
economic
a personal element to this
added
topic, which delves
multifaceted
economic prosperity, quality
into
life, and well-being, with
of
that have divided
conclusions
since the dawn of
researchers
Lorca-Susino is originally from Spain, a nation
Dr
has experienced significant economic growth
that
the advent of democracy in 1975, and
since
after joining the European Union in
particularly
In sharp contrast, Dr Acevedo is originally
1986.
Venezuela, a country that has experienced
from
developed nation during the 20th century,
and
the country has regressed to a developing
today,
where in 2022, 81.5% of households had
nation
below the poverty line according to the
incomes
National Poll of Living Conditions (ENCOVI),
latest
by the Andrés Bello Catholic University in
released
2022. As the authors explain, “in both
November,
economic freedom was a significant
countries,
tied to economic growth.” Because of their
factor
experiences, the historical relationship
personal
Spain and Latin America, and the direct
between
of Venezuela on Latin American countries,
influence
decided to analyze the short-run
“we
of the erosion of economic freedom
consequences
it impacts the economic growth rates and
as
of 19 countries in Latin America in the
institutions
innovative research brings to light a
Our
approach when it comes to identifying
new
short-run consequences, in fact, the
these
gathered suggests that the more
evidence
erosion of economic freedom, the
acute
the loss of economic growth at a
greater
significant level different from
statistically
In fact, for each percentage point
zero.
of economic freedom, we
erosion
economic growth rates between
observed
and 1.6 percentage points lower the
0.3
year.
following
graph above shows the positive
The
between economic growth,
correlation
as the growth rate of
measured
real gross domestic
expenditure-side
(GDP) per capita at chained
product
power parity in 2017 dollars
purchasing
from the Penn World Table, and
taken
freedom, measured by the data
economic
with variables from the Fraser Institute
set
for economic freedom, the
(2021)
Country Risk Guide for
International
by PRS Group, and the V-
corruption
Dataset by Coppendge and
Democracy
(2021) among other sources.
others
The Short-run Consequences of The Erosion of Economic
Freedom for Growth and Institutions in Latin America: An
Unorthodox Experimental Review of The Twenty-first Century
DR. MARIA LORCA-SUSINO
Image preview
what Acemoglu, Johnson, and Robinson call a
of economic freedom for growth
and institutions in Latin America” -
“reversal of fortune,” whereby despite been a rich
7
civilization.”
twenty-first century.”

Economics Club hosted Dr. Charles Bartlett, who
The
his research regarding the similarities
presented
the Roman Financial crisis of 33 CE and the
between
Financial crash in “A Funny Thing Happened on
2008
Way to the Fed”. This lecture first laid out the
the
of the Roman financial system, as well as the
intricacies
of its catastrophic crash, and using the
particulars
example, isolated what is still unknown about the
2008
crisis and the monetary policy which led to its
Roman
resolution.
a Q&A session following the presentation, students
In
the opportunity to speak at length with Dr.
relished
who approached the crises from a historical
Bartlett,
policy perspective, focusing first on the events of
and
and later tackling possible modern-day policy
antiquity,
Dr. Bartlett is a member of the Classics
responses.
at the University and has been a longstanding
faculty
to the Economics Club. Next semester, he
contributor
be teaching a course on Economic history in the
will
department.
a recent Economics Club meeting at the
During
of Miami, Professor Luis Locay
University
a captivating presentation titled
delivered
Human Behavior in Prehistory." He
"Modeling
by offering an insightful summary of
commenced
prehistory leading up to the shift towards
human
his talk, Professor Locay explored
Throughout
theories explaining the transition to
various
notably discussing Esther Boserup's
agriculture,
linking it to population growth.
perspective
he delved into economic
Additionally,
of the distribution of populations in
interpretations
North America upon contact with
pre-Columbian
We extend our gratitude to Dr. Locay
Europeans.
Follow us on
Instagram!
@um.econ
THE ECONOMICS
CLUB PRESENTS
A Funny Thing Happened
on the Way to the Fed
Modeling Human
Behavior in PreHistory
agriculture.
for sharing his expertise with us.

Karabo stated, “Last fall, I had the privilege of
Elaine
in the renowned Fed College Challenge.
participating
nationwide competition, hosted by the Federal
This
System, invited college students to delve into
Reserve
realm of economics and monetary policy, offering a
the
to showcase their analytical skills and creativity
platform
would be judged by a panel directly involved in the
that
Fed”.
these participants was a cohort of five of our
Among
own students who embraced the challenge with
very
and enthusiasm. With the help of our professors,
fervor
were able to pull together a simulated FOMC
we
that was then submitted to the 2023 College
meeting
Challenge. Following our engagement in the
Fed
we were granted a unique opportunity to
competition,
the Open House event hosted by the Board of
attend
of the Federal Reserve System in
Governors
D.C.
Washington
this enlightening experience, I had the privilege
During
network with students from all over the country that
to
in the challenge, professors from these
participated
including Harvard College that was the winner
schools
the challenge, professionals from various fields
of
the Federal Reserve System, gaining invaluable
within
into the intricate workings of the nation's
insights
banking system.
central
the event, we were immersed in a
Throughout
of discussions, workshops, and
variety
including how to fine-tune our
presentations,
for the next Challenge, and a
presentations
of opportunities available to us during
myriad
after our academic journey, including
and
research fellowships, and career
internships,
within the Federal Reserve System.
pathways
experience was personally enlightening.
This
helped me gain a deeper understanding of
It
principles and their direct
economic
Sometimes what I learn in class
applicability.
seem abstract and completely
may
but I saw firsthand how I could
theoretical,
what I was being taught to the current
apply
of the U.S. economy and an avenue of
state
FED CHALLENGE
Miami Herbert Student and Economics Major
Elaine Karabo and Faculty member Miguel
Iraola Guzman
the distinguished individuals I had the
Among
of meeting was the Chair of the Federal
honor
Jerome Powell, who gave us a rare
Reserve,
into the leadership and vision driving
glimpse
monetary policy at the highest levels.
potential careers in doing so.
Supporting our students in events
like the Fed Challenge is an example
of how we put your donations to
work. Thank you for your support!

factors and policies
Economic
the health and wealth of
determine
While this seems clear
nations.
it can be a challenging task to
enough,
the underlying causes of
identify
outcomes, and to formulate
economic
implement promising economic
and
reforms. In the Department of
policy
at the University of Miami,
Economics
believe that reasoned, fact-based,
we
inclusive discussions are essential
and
assessing the merits of new and
for
economic policies.
existing
team of experts is on a mission to
Our
research of the highest
produce
caliber, teach and mentor
academic
next generation of leaders, and to
our
service to our community.
deliver
you would like to learn more about
If
and how you can support our
us
please reach out to David
efforts,
at
Andolfatto
or call
david.andolfatto@miami.edu
284 - 9915.
(305)
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