Into the Economist's Mind
The INOMICS Questionnaire: Fratzscher vs Gómez Pineda
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The following article first appeared in the INOMICS Handbook 2023.
President of the DIW Berlin and well-known macroeconomist, Prof. Dr. Marcel Fratzscher poses the questions for accomplished central banker and author Dr. Javier G. Gómez Pineda in this latest INOMICS interview, where we ask economists for their thoughts about life and economics. Dr. Gómez Pineda graciously took to the spotlight in this latest round. The interview, dubbed Fratzscher vs. Gómez Pineda, dives into the importance of the Lucas critique, role models for women in economics, the challenges with maintaining global financial market stability (while still allowing for growth for emerging economies), how economics can contribute to climate policy, and more.
The interview with Dr. Gómez Pineda offers an interesting look into the thoughts of an accomplished central banker. For early-career economists in particular, it is not only enlightening but full of essential advice, not least of which is the importance of continuous learning and reading. Our advice – start your reading here!
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. His interview responses to Dr. Fratzscher’s queries are below.
Marcel Fratscher: What is your favorite place on earth?
Javier Gómez Pineda: To start with, I would like to express my gratitude for this interview and having the opportunity to share my thoughts.
My favorite place on earth is where you can share with your loved ones. To me, it is home.
As for places you get to be around as an economist, I would say my favorite place would be the macro seminar at the University of Chicago. As a student at Chicago, I had the chance to see several papers being greatly improved by comments from the audience. I recall once or twice Gary Becker gave incredible micro feedback to two macro papers.
MF: Outside of economics, what occupation would you choose if you could be absolutely anything?
JGP: I think I would be a civil engineer to help improve infrastructure in Colombia. As an economist, in a way I happened to be sort of a civil engineer when I got involved in the implementation of the inflation targeting framework in Colombia back in 2000. However, I would choose in the first, second and third place to be an economist.
MF: What is the virtue you appreciate the most?
JGP: An important virtue is that of studiousness. At whatever level you consider, studiousness enables you to better understand and help improve the world you live in. Working in research and teaching is a privilege and a continuous opportunity to exercise this virtue. Students should keep in mind that knowledge is not something that ends at graduation, you always have to keep learning and maintain yourself actively, even if you are not in a research or teaching job.
MF: Your all-time favorite figure in economics?
JGP: Robert Lucas. Thanks to the Lucas critique, we no longer rely on those unsafe reduced-form econometric equations. It is also thanks to the rational expectations revolution that we now routinely use rational expectations DSGE monetary policy models, although we have had to amend them with frictions so that they are not too forward-looking. Finally, I think the methodological approach of welfare evaluation is one that continues to bear fruit as progress continues in macroeconomics.
MF: Your #1 economics blog?
JGP: I read VoxEU CEPR to learn about the work of several macroeconomists who share their views there. Also, as I drive to teach my course on Monetary Theory, I listen to the Macro Musings podcasts of the Mercatus Center of George Mason University.
MF: Your ideal student?
JGP: Every student is special and different in his or her own way and worth the best teaching effort. That said, in my opinion, the ideal student is the one that later becomes your co-author. That turn of the matters means that the student had been motivated enough to learn the material and develop his or her vocation, hopefully becoming a better version of him or herself.
MF: What should be done to address gender bias in research in economics?
JGP: Although I am not very knowledgeable about this topic, in my humble opinion I understand that the gender bias in research in economics could be expected to improve as a consequence of the influence of current female role models on school enrollment. There are currently outstanding role models in academia, such as Esther Duflo, as well as in policy institutions such as the IMF, the Fed and the ECB, such as Kristalina Georgieva, Gita Gopinath, Janet Yellen, and even cases of lawyers working on economic issues, such as Christine Lagarde.
MF: What is the most misguided research agenda in economics?
JGP: Misguided literally means with the wrong guide. When we listen to the weather forecast in the morning, we do not get yesterday’s weather, but a forecast for the future of the day or the week. Yet our models and analysis have too often been retrospective, backward looking. Thanks to the rational expectations revolution and the view of economics as something you can put in a computer and run, as Robert Lucas has said, we have come to routinely run prospective, forward-looking models that enable us to situate ourselves in what matters. At the other extreme, we have also had to amend overly forward-looking models because they lose touch with reality, with the data. In that sense, a well-guided research agenda means a fair amount of forward-looking weight in our models and analyses.
MF: What is the most promising current research field or issue in economics?
JGP: Macrofinancial policy and its effect on financial deepening would be an area with high potential, particularly in emerging markets and developing economies. We saw the cost of loose macroprudential standards on financial crises in emerging and developing economies in the 1997-1999 financial crisis and in advanced economies in the 2008-2009 financial crisis. Since then, several macroprudential instruments have been put in place and the amplitude of the financial cycle has been tamed. Although good in themselves, these policies could have subdued financial deepening and hence growth. Then, the challenge is two-fold: a stable financial system and progress in financial deepening.
MF: Where does economic research have the most influence on policy-making?
JGP: The most influence has definitely been in monetary policy. The controversy between monetarists and Keynesians that lasted for about the complete second half of the past century led to a fruitful synthesis, the New Neoclassical Synthesis (NNS). It is a practical theory for monetary policy making, a language for communication between monetary policymakers and the core of the forward looking operative procedure of central banks. As someone [ed: the psychologist Kurt Lewin in 1952] once said, there is nothing more practical than a good theory; this point of view I think applies very well to the NNS and its practical use in monetary policy.
MF: On what issues should policy listen more to economists?
JGP: Economics has much to contribute to any field that involves incentives. Rational choice is our grand piece of theory that we can export to contribute to other disciplines. The homo economicus behaves rationally and can also respond to changes in incentives, as dictated by policy.
One policy field where incentives can induce change in behavior is in climate policy. Incentives should be paramount in articulating and implementing tax and subsidy climate policies and in inducing change in behavior. Another area where incentives can be put to work at great benefit is road traffic. Congestion taxes can contribute to a more efficient use of roads as a public good that is in short supply. I am sensitive to this issue given my long commuting times in Bogotá. Finally, market competition can help improve living standards in all markets that are not natural monopolies. Examples are the educational and health systems.
MF: What is your career advice to a young economics researcher?
JGP: My advice would be to always read with a humble attitude rather than being too critical. Read, always aiming to learn from your colleagues. Read and read a lot. Then you will find where you would like to put your effort. Then think, think about your arguments and theses, and then, only then, be critical - of your own work. To improve your thinking, engage with others and work in groups.
The above article first appeared in the INOMICS Handbook 2023, which you can download on our site.
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