Insights into Central Banking Careers with Dr. Gómez-Pineda
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Dr. Javier G. Gómez-Pineda, our interview guest for the 2023 INOMICS Handbook, graciously agreed to return for a second interview. This time, the INOMICS team prepared some career-related questions for the central banker. With his answers, Dr. Gómez-Pineda shares his wisdom about central banking and economist careers in general with you, our readers.
This includes advice about which skills aspiring economists should learn, the differences between research and policy economists, topics that prospective central bankers should focus on in their studies, and more. Any serious student of economics – and indeed, many curious economists – will benefit from hearing Dr. Gómez-Pineda’s advice.
Javier G. Gómez Pineda is Senior Economist (Investigador Principal) at Banco de la República (the central bank of Colombia). He also teaches Monetary Economics at Universidad del Rosario in Bogotá. His research interests are in Monetary Economics and International Economics; he is author of the textbook Dinero, banca y mercados emergentes, los países emergentes en la economía global, 2010, Ed. Alfaomega; and he holds a PhD in Economics from the University of Chicago.
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Without further ado, read on for the interview!
Sean McClung: How did you become an economist – was it always your plan?
Javier G. Gómez-Pineda: Choosing a career can be challenging. In the beginning I was not very sure about my career choice, I considered at least two alternatives, but in the end I decided to study economics. I think what ultimately led me to this choice was perhaps the idea that what is important in choosing a career is not how you earn an income, but how you will spend the rest of your life in a way that contributes and serves others. Later, you discover that in order to serve others, you need to know how to be useful, to have a good command of your field, your techniques and your work.
At the end of my undergraduate studies, I worked as a research assistant (RA) for Professor Lauchlin Currie. It was he who encouraged me: “if you want to be a good economist, you have to study abroad.” At that time, there were no graduate programs in Colombia, but there were scholarships for graduate studies abroad, provided that the studies were made at a top university. These Central Bank scholarships were named after Professor Lauchlin Currie.
My main challenge was the English language; not so much the reading, because I had studied English reading in my undergraduate studies; but more the listening and writing. So, I did some English work before I applied to graduate school. I studied American English at an institute and learned some grammar. At the same time, I studied British English at another institute and learned some conversation skills. I also traveled to the United States for a short time to study English and to expand my vocabulary a little.
In the end, I passed the English exam and got a place on a graduate program. However, at the beginning of my first year of graduate studies, I struggled with listening comprehension. By the middle of the first year, it was not the language that was the problem, but the math. I overcame the “math scare” by putting more emphasis on economic intuition. I think in the process I managed to learn some English, get over the math scare, and study abroad, but I still strive to become a better economist and write more in English.
SM: What part of your educational background would you say is most valuable to your current work?
JGP: I think a valuable part was my thesis work during my graduate studies; this was due to my empirical thesis. It was this work that got me into running regressions. Since then, I have done more empirical work than theoretical work.
I think another part of the training that I found valuable was the macro problem sets. In one or two of them, I had to learn how to run macro models on the computer as well as get familiar with some of the software packages. Of course, the most valuable part of the educational background were the courses themselves, especially in macroeconomics, international economics and econometrics.
However, education does not stop when you graduate. Theory evolves, better techniques become available, new software packages are developed. As research economists, our job is to contribute to these developments, and so we must continue to educate ourselves by at least reading the most relevant authors in our field and attending conferences. As policy economists, our job is to incorporate these developments into our analysis so that our work is based on the most appropriate methods.
SM: How has your day-to-day as a central banker been different than you expected (if at all)?
JGP: I expected that my work would involve running regressions, as I had done in my thesis work, and that turned out to be true. In contrast, I did not expect that my work would involve DSGE models, Kalman filtering, and Bayesian estimation, which I had learned in the university, but that turned out to be part of my work.
SM: What is/are the most rewarding part(s) of the job for you?
JGP: The contribution of an economist is sometimes less tangible than that of other professions. Unlike economists, a doctor can have a big impact on a person’s life in a very concrete way, and the medical profession can contribute to the health of the people in a country or even in the world. I think the work of a macroeconomist should have a small impact on the country while the economics profession should have an impact on the economic well-being of the people in the country.
For me, the most rewarding part of the job has been to see that the inflation model is used by the Central Bank as an input in the interest rate policy decision, to know that our monetary policy report is valued by the interest-rate-setting committee, and to see that our policy working papers are used as a reference point for understanding monetary and macroprudential policy in Colombia. At the end of the day the expectation is that this work will hopefully have some impact in the country.
It is also rewarding to be able to share this knowledge with students at the university.
SM: As a central banker, do you get to research? What is your favorite part of that research? How is it different from academic research?
JGP: Central banks typically have two types of economists: research economists and policy economists. Research economists write papers that are published as central bank working papers and in academic journals. Policy economists work on the periodic inflation forecasts, the Inflation Report (IR); and the periodic financial stability assessments, the Financial Stability Report (FSR). The IR supports interest rate policy decisions and the FSR supports macroprudential policy decisions. I work about 80 percent of the time as a research economist and 20 percent as a policy economist. Since I work on monetary economics in both roles, my work as a research economist and as a policy economist overlap.
In Colombia, the central bank has a committee of research economists that prepares a quarterly monetary policy note to the central bank’s interest-rate-setting committee. I am a member of this three-person research economists committee, and this work represents about 20 percent of my work as a policy economist.
The time devoted to research may vary across economists. For instance, in Colombia the central bank has research economists that devote 100 percent of their time to research. Conversely, some policy economists do not have time left for research and some might work about 20 percent of the time as research economists. They publish this research as technical notes in the IR and FSR, as working papers and sometimes in journals.
Academic research covers a wide range of topics, while central bank research tends to focus on monetary and financial stability. Academic research tends to produce sophisticated analytical and algebraic results; however, at times the quantitative dimension of academic research is not as sophisticated as that sought for by central bank economists. Academic research tends to emphasize the sign and significance of estimated coefficients, while central bank research tends to emphasize the quantitative performance of the models, issues such as the impact of interest rate decisions on inflation over time, in exact percentage points, also quantifying the amount of uncertainty involved in the transmission.
While there are differences between academic and central bank research, there are also similarities. Both academic and central bank research share the current paradigm of the New Neoclassical Synthesis, see Goodfriend and King (1997) and Woodford (2009). Some academic economists sometimes hold policy positions in central banks, and some central bank economists also teach at the university.
SM: In your experience, what would you say is the best type of experience for prospective central bank hires to have?
JGP: For me, a sufficient condition is a strong interest and vocation in monetary economics or macroeconomics. A thesis in monetary economics or in international economics is a clear sign of this interest. Beyond the thesis, a working paper or article in monetary economics is also a good signal.
Other skills are very welcome, but not strictly necessary, as they can be acquired on the job. These include familiarity with software packages such as R, Python and Matlab and a good command of the English language.
SM: What other tips, advice, or insights do you have for younger economists interested in monetary policy or central banking?
JGP: My advice would be: read the literature and get into the habit of reading the papers. In addition, keep in mind that what you sow is what you shall reap, so read the literature and also get familiar with the software packages used to build your estimations and models; get those skills.
Finally, for those who are not native English speakers, it is important to learn how to write papers. There are several books and articles available on this subject. One starting point is McClosky (2000) and also Banco Central de Chile (2017). It is a good idea to go through this literature and try to learn how to write papers. If possible, get help from an English editor at your institution or on your own.
SM: What else (if anything) do you think should be shared about your career path or current role?
JGP: Central banks face issues that are common to the central banking community as a whole. So try to make your research relevant not only to your central bank, but if possible to the central banking community; if possible, work with a global approach. And finally, group research is better than individual research. So, it is important to work in groups and write papers with others.
Banco Central de Chile, “Guía de Estilo en Inglés” (Accessed Sep. 19, 2023), 2017.
Goodfriend, Marvin, and King Robert. “The new neoclassical synthesis and the role of monetary policy.” NBER Macroeconomics Annual 12 (1997): 231-283.
McClosly, Deidre, Economical Writing, 2nd Ed. Waveland Press Inc, 2000.
Woodford, Michael. “Convergence in macroeconomics: Elements of the new synthesis.” American Economic Journal: Macroeconomics 1, nº 1 (2009): 267-279.
Header image credit: Dr. Javier G. Gómez-Pineda.
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