Filippo Gaddo, SPE Councillor, held a discussion with Gauti Eggertsson, Professor of Economics at Brown University Economics Department and a recognised international finance and macroeconomics author - most recently he presented a paper on the inflation surge of 2020s at the August Jackson Hole Fed conference. See paper here

In the opening interview of 2025, Filippo and Gauti reflect on the 'inflation surge' of early 2020s and its causes, dynamics and potential resolution. In particular, Gauti outlines his theory of a 'Slanted-L Phillips Curve' - whereby when the vacancy to employment ratio goes above a certain ratio [the Beveridge threshold] then the Phillips curve become very steep or almost vertical and any small movement in labour market can cause a large increase/decrease in inflation - which is what we saw when Covid provided first a supply shock and than, through government response, a demand shock to the system. Whilst the reading of the causes of the inflation surge may be different from that of other previous guests on the podcast, Gauti agrees that the government response in 2021 was probably too much and too late, and the reaction of monetary authorities was potentially slow.

The discussion also highlights the role of inflation expectations and how they interacted with the labour market in moderating and reducing inflation in 2023 and 2024. Filippo and Gauti finally share some thoughts on the incoming Trump administration and what we may expect in terms of impact from trade, tariffs and fiscal policies - and Greenland also gets a mention!

A great conversation to start the new year.

Gauti B. Eggertsson is a macroeconomist and a Professor of Economics at Brown University Economics Department. He received his Ph.D. in Economics from Princeton University in 2004, after having completed his B.S. in economics from the University of Iceland.

He has worked at Research Departments of the International Monetary Fund and the Federal Reserve Bank of New York. Since graduation he has also been visiting faculty at Princeton, Yale, and Columbia where he taught international finance and macroeconomics at both graduate and undergraduate level.

Eggertsson has published in a variety of professional journals such as the American Economic Review, American Economic Journal: Macroeconomics, American Economic Review: Insights, Brookings Papers on Economics Activity, Economic Journal, Journal of Monetary Economics, Journal of Money, Credit and Banking, Review of Economic Studies, Review of Economic Dynamics and the Quarterly Journal of Economics.

The main focus of his work is the analysis of monetary and fiscal policy over the business cycle, both from a modern and historical perspective.