Galo Nuño (Bank of Spain) 15.2.2024

It is our pleasure that Galo Nuño (Bank of Spain) will present on Thursday, February 15, 2024, at 11:00 in room RB437 about his research on the topic “Navigating by Falling Stars: Monetary Policy with Fiscally-driven Natural Rates”.

Registration is not required and anyone who would like to attend is warmly invited.

ABSTRACT: We study a new type of monetary-fiscal interaction in a heterogeneous-agent New Keynesian model with a fiscal block. Due to household heterogeneity, the stock of public debt affects the natural interest rate, forcing the central bank to adapt its monetary policy rule to the fiscal stance to guarantee that inflation remains on its target. There is, however, a minimum level of debt below which the steady-state inflation deviates from its target as the ZLB binds. We analyze the response to a debt-financed fiscal expansion and quantify the impact of different timings in the adaptation of the monetary policy rule, as well as the performance of alternative monetary policy rules that do not require an assessment of the natural rates. We validate our findings with a series of empirical estimates.

BIO: Galo Nuño is the Head of the Monetary Policy and Capital Markets Division at the Bank of Spain. His research focuses on monetary economics, microfinance, and computational methods. In particular, he has developed, with different coauthors, some new theoretical and numerical techniques for the study of continuous-time heterogeneous-agent models, including the analysis of optimal policies and the solution and estimation of nonlinear models with aggregate shocks. His research has been published in journals such as Econometrica, Journal of Political Economy: Macroeconomics, American Economic Journal: Macroeconomics, Journal of the European Economic Association, and Journal of Monetary Economics. Galo has 20 years of experience in central banking, commercial banking, and management consulting. He has worked at the Bank for International Settlements (BIS), European Central Bank (ECB), Banco de España, BBVA, and Boston Consulting Group (BCG). He holds a PhD in Electrical Engineering (Doctor Ingeniero de Telecomunicaciones) by the Polytechnical University of Madrid (UPM) and a MSc in Management Science and Engineering by Stanford University, where he was the valedictorian.