Resolving the old controversy between Keynes and the classics/monetarists, from Gauti B. Eggertsson and Cosimo Petracchi nber.org/papers/w29158

I have just completed this paper with my grad-student Cosimo Petracchi. How do you make sense of the famous controversy between “Keynes” and the “Classics/Monetarist”? I have been thinking about this topic for a long time. 1/7

Especially how to make sense of a series of very confusing empirical papers written in the 70’s that claimed to “test for the liquidity trap” --- finding that it did not exist. I came across this work early on in my carrier back in early 2000’s. 2/7

People in the monetarist tradition kept informing me that there was “no empirical evidence” for the liquidity trap – citing this work. One element of the paper is to repeat these old “empirical tests” and show that new data overturn previous results. 3/7

But the basic point of the paper, perhaps, is that these tests were all wrong. The “traditional” LM curve plotted up the LM curve against long-term interest. It is subject to a basic Lucas critique. Its form depends on the assumed policy regime. 5/7

You can get either “Keynes” or the “Classics/Monetarist” popping out of an "IS-LM" structure depending on assumption about the policy regime - as long as you construct the model with careful microfoundations. 5/7

One take-way is that it provides a nice illustration (I think!) of the value of microfoundations – but some have been pushing for that they don’t serve much purpose in the post 2008 “macro methodology” discussion. 6/7

Anyway, this is an intellectual itch that I have been meaning to scratch for about 20 years. Only managed to do it thanks to Cosimo. 7/7

My book "The Journey of Humanity" will be published by Penguin Random House 🐧🏠📚 & simultaneously in 28 languages Description & pre-order: US penguinrandomhouse.com/books/679024/t… UK penguin.co.uk/books/144/1444… #EconTwitter #Twitterstorians #Demographics #PoliticalScience

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1/2 UniCredit Italia Foundation has announced winners & runners up of 9th Econ JM Best Paper Award. Warmest congrats to the 5 winners Daniele Caratelli Suzanna Khalifa Benny Kleinman Virginia Minni Lukas Nord

2/2 & to the 8 runners up Alexander Dietrich Alistair Macaulay Francesco Mazzola Marta Morazzoni Shumiao Ouyang Princeton Economics Cosimo Petracchi Filip Premik University of Minnesota Anna Vitali Check out their profiles & JM papers on our ejme-candidatedirectory.org/candidates Royal Economic Society AEE

Tomorrow's DEF EJM candidate: Cosimo Petracchi website: cosimopetracchi.com 📅 23 January ⏰ 12 PM 👉 Aula TL

🎉 Excited to welcome Cosimo Petracchi to the DEF as our newest Assistant Professor! 🌟 We're certain he'll bring fresh insights and energy to our academic community. Looking forward to a bright future of collaboration and innovation with Cosimo! #NewFaculty

📢 DEF IS HIRING and we're on the hunt for brilliant minds! Are you ready to make a difference? 🌟 Submit your application now to become an Assistant Professor econjobmarket.org/positions/9829 and take the first step toward an extraordinary #AcademicCareer! #EJM2023

We are proud to host the last stop of the The Review of Economic Studies Tour on May 20-21! Please register here 👉 economia.uniroma2.it/en/def/review-… if you want to participate.

Monetary Regimes and Real Exchange Rates: Long-Run Evidence at the Product Level t.ly/f_MKl Kim Jason Marco Mello Cosimo Petracchi Brown University University of Aberdeen Economia Tor Vergata Università di Roma Tor Vergata Uffstampa_RomaTorVergata SSRN RePEc #EconTwitter

#Academia is awesome #1: very grateful to all attendess of our first PRIN2022 conference organized with Nicola Borri and Majo Arteaga SDA Bocconi in our Rome campus. The program is here: dropbox.com/scl/fi/3uijxas… Very fun and productive group 👇