Ricardo Reis

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Ricardo Reis
Born (1978-09-01) September 1, 1978 (age 45)
Academic career
InstitutionLondon School of Economics
School or
New Keynesian economics
Alma materHarvard University (Ph.D., 2004)
LSE (B.Sc., 1999)
InfluencesN. Gregory Mankiw
ContributionsCentral bank swap lines; Debt revenues; R* wedge ; ESBies or SBBS; misallocation hypothesis for the Portuguese slump; QE and central bank income losses ; HANK model; Automatic stabilizers and transfer multipliers ; Sticky information ; Disagreement in inflation expectations
AwardsMenger award (2022), Jahnsson medal (2021), BdF-TSE price (2017), Bernacer prize (2016), Kiel award (2013), Arrow Prize (2004).
Information at IDEAS / RePEc

Ricardo A. M. R. Reis (born 1 September 1978) is a Portuguese economist and the A. W. Phillips professor of economics at the London School of Economics. He has published widely on macroeconomics, including both monetary and fiscal policy, inflation and business cycles, and for these he won the 2021 Yrjö Jahnsson Foundation medal awarded every two years by the European Economic Association for best economist under the age of 45. He writes a weekly op-ed for the Portuguese newspaper Expresso.

Academic career[edit]

Reis earned his Bachelor of Science (B.Sc.) degree from the London School of Economics in 1999, and his Doctor of Philosophy (Ph.D.) from Harvard University in 2004. He taught at Princeton University from 2004 to 2008 before moving to Columbia University where he became a full professor at the age of 29, one of the youngest ever in the history of the university. He is an academic advisor and visiting scholar at central banks around the world, and sits on the board of multiple institutions.

Economic contributions[edit]

Reis has contributed several original ideas to economic science and policy debates.

Sticky information and inattentiveness[edit]

In 2002, with Gregory Mankiw, Reis proposed the sticky-information Phillips curve[1] and followed it later with rational theories of inattention,[2] and sticky-information models in general equilibrium.[3]

Disagreement in surveys of inflation expectations[edit]

In 2004, with Gregory Mankiw and Justin Wolfers, Reis started the modern empirical literature that focuses on disagreement in survey inflation expectations to measure credibility, anchoring, and evaluate policies and models.[4] Indicators of disagreement following this work are today used by most major central banks.

Pure inflation[edit]

In 2010, with Mark Watson, Reis developed measures of pure inflation, which have become popular measures of core inflation.[5]

The diabolic loop and ESBies[edit]

In 2011, Reis with Markus Brunnermeier, Luis Garicano, Philip R. Lane and others, argued that banks holding bonds issued by their sovereign creates a "diabolic loop" in that small changes in the perceived solvency of the sovereign can amplify into large crises.[6] This concept became central in accounts of the Euro crisis and is also referred to as the "doom loop (economics)" or the "bank-government nexus". They proposed creating European Safe Bonds (ESBies) to break the diabolic loop without having the joint and several liability of Eurobonds.[7] The European Systemic Risk Board in 2018 proposed a variant of ESBies, labelled Sovereign Bond-Backed Securities (or SBBS) for a more stable Eurozone.[8]

HANK models[edit]

In 2011, Hyunseung Oh and Reis wrote the first model that merged the S. Rao Aiyagari model of incomplete markets with a New Keynesian model of nominal rigidities.[9] In 2013 with Alisdair McKay he wrote the first business-cycle model that merged the Krusell-Smith model of business cycles with the Christiano–Eichenbaum–Evans model of monetary policy.[10] These models later evolved into HANK, or Heterogeneous Agent New Keynesian Models.

Automatic stabilizers[edit]

In 2013, with Alisdair McKay, Reis showed that automatic stabilizers can be very effective by reducing the need for precautionary savings at the start of recessions.[11]

Central bank losses and solvency[edit]

In 2013, partly with Robert E. Hall, Reis predicted that a consequence of quantitative easing was that once central banks started hiking rates, they would suffer large losses.[12][13] This prediction came true ten years later in 2023. Reis went on to characterize the connections between the central bank budget constraint and the budget constraint of the fiscal authority.[14] Hall and Reis invented the concept of central bank insolvency as a description of lack of monetary independence that leads to hyperinflation.

The misallocation hypothesis of slumps and crashes[edit]

In 2013, Reis proposed the misallocation hypothesis for the Portuguese stagnation.[15] Joining the eurozone meant large capital inflows that were misallocated because of underdeveloped financial and political systems leading to a slump in productivity and sowing the seeds of the crisis. Financial integration without financial depth creates crashes.

Ample reserves and the Friedman rule[edit]

In 2016, at the Kansas City Federal Reserve economic policy symposium, Reis proposed that a central bank's balance sheet should be just large enough to satiate the demand for bank reserves and satisfy the Friedman rule. He also pointed to the limits of a larger balance sheet because of the fluctuations in net income that result.[16] The Fed and other central banks later adopted this idea via their ample reserves system.

Central bank swap lines[edit]

With Saleem Bahaj in 2018, Reis showed that central bank swap lines work just like a discount window for foreign banks, and so put a ceiling on the cross-currency basis, or covered interest parity deviations.[17] He proposed that the swap lines should be open daily and extended to more countries, which happened during the pandemic in 2020.[18]

Debt revenue and m* versus r*[edit]

The fall in the r* on government bonds came with an increase in the wedge between the return on private capital and government bonds.[19] This creates a seignorage revenue from issuing public debt: the debt revenue.[20] Reis argued in 2022 that r* was likely to rise, and that a low-r* view of the world was a reason why central bank were so slow to react to the rise in inflation in 2021

The inflation of 2021-2023[edit]

In 2021, Reis was one of the first economists to warn that inflation would soon rise. He emphasized that the expectations data was drifting up like in the early 1970s in surveys and in option prices[21][22] He provided an early account of why inflation was out of control.[23] In early 2023, he recommended the ECB keep rates high for long.[24]

A crash course on crises[edit]

With Markus Brunnermeier Reis published in 2023 an introduction to the macroeconomic and financial concepts behind financial crises in the book A Crash Course on Crises.[25]


  1. ^ Mankiw, N.G. and R. Reis (2002) "Sticky Information Versus Sticky Prices: A Proposal To Replace The New Keynesian Phillips Curve," Quarterly Journal of Economics, 117(4), 1295–1328, doi:10.1162/003355302320935034
  2. ^ R. Reis (2006) "Inattentive Producers," Review of Economic Studies, 73(3), 793–821, doi:10.1111/j.1467-937X.2006.00396.x
  3. ^ Mankiw, N.G. and R. Reis (2010) Imperfect Information and Aggregate Supply" Handbook of Monetary Economics doi:10.1016/B978-0-444-53238-1.00005-3
  4. ^ Mankiw, N. G., J. Wolfers and R. Reis (2004) "Disagreement about Inflation Expectations" NBER Macroeconomics Annual, 18, 209–248 doi:10.3386/w9796
  5. ^ Reis, R. and M. Watson (2010) "Relative Goods' Prices, Pure Inflation, and the Phillips Correlation" AEJ: Macroeconomics, 2 (3), 128–57 doi:10.1257/mac.2.3.128
  6. ^ Brunnermeier, Garicano, Lane, Marco Pagano, Reis, Santos, Thesmar, van Nieuwerburgh and Vayanos (2011) "ESBies: A Realistic Reform of Europe's Financial Architecture" In: The Future of Banking: A VoxEu.org Book, edited by Thorsten Beck, 15-20, October 2011
  7. ^ Brunnermeier, Langfeld, Pagano, Reis, van Nieuwerburgh and Vayanos (2017) "ESBies: Safety in the Tranches," Economic Policy 32, 177-219.
  8. ^ https://www.esrb.europa.eu/pub/task_force_safe_assets/shared/pdf/esrb.report290118_sbbs_volume_I_mainfindings.en.pdf
  9. ^ Oh, H, and R. Reis (2011) "Targeted Transfers and the Fiscal Response to the Great Recession," Journal of Monetary Economics, 59, S50-S64 doi:10.1016/j.jmoneco.2012.10.025
  10. ^ McKay, A. and R. Reis (2011) "The Role of Automatic Stabilizers in the U.S. Business Cycle," NBER working paper 16775 doi:10.3386/w19000
  11. ^ McKay, A. and R. Reis (2011) "The Role of Automatic Stabilizers in the U.S. Business Cycle," NBER working paper 16775 doi:10.3386/w19000.
  12. ^ Reis, R. (2013) "The Mystique Surrounding the Central Bank's Balance Sheet, Applied to the European Crisis" American Economic Review, 103 (3), 135–40 doi:10.1257/aer.103.3.135
  13. ^ Hall R. and R. Reis (2013) "Maintaining Central-Bank Solvency under New-Style Central Banking" doi:10.3386/w21173
  14. ^ Reis, R. (2016). "Can the Central Bank Alleviate Fiscal Burdens?" NBER Working Papers 23014[1]
  15. ^ R. Reis (2013) "The Portuguese Slump and Crash and the Euro Crisis," Brookings Papers on Economic Activity, 46, 143-193 doi:10.1353/eca.2013.0005
  16. ^ R. Reis (2016) "Funding Quantitative Easing to Target Inflation," Designing Resilient Monetary Policy Frameworks for the Future, Jackson Hole Economic Policy Symposium: Federal Reserve Bank of Kansas City, August 2016
  17. ^ Bahaj, Saleem; Reis, Ricardo (2022). "Central Bank Swap Lines: Evidence on the Effects of the Lender of Last Resort". The Review of Economic Studies. 89 (4): 1654–1693. doi:10.1093/restud/rdab074.
  18. ^ <https://cepr.org/publications/covid-economics-issue-2
  19. ^ https://cepr.org/publications/dp15950
  20. ^ Reis, Ricardo (2022). "Debt Revenue and the Sustainability of Public Debt". Journal of Economic Perspectives. 36 (4): 103–124. doi:10.1257/jep.36.4.103.
  21. ^ https://ideas.repec.org/p/cfm/wpaper/2209.html
  22. ^ https://personal.lse.ac.uk/reisr/papers/99-infdis.pdf
  23. ^ The Burst of High Inflation in 2021–22: How and Why Did We Get Here?, personal.lse.ac.uk
  24. ^ https://www.ecb.europa.eu/pub/pdf/sintra/ecb.forumcentbank202206~a6bc0541ca.en.pdf
  25. ^ https://press.princeton.edu/books/hardcover/9780691221106/a-crash-course-on-crises

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