Share this page!

Enter URL or ID to Unroll

You can paste full URL like: https://x.com/threadreaderapp/status/1644127596119195649
or just the ID like: 1644127596119195649

How to get URL link on X (Twitter) App

  1. On the Twitter thread, click on or icon on the bottom
  2. Click again on or Share Via icon
  3. Click on Copy Link to Tweet
  4. Paste it above and click "Unroll Thread"!
  5. More info at Twitter Help
Ivan Werning Profile picture
Ivan Werning
@IvanWerning
MIT Professor of Economics | Macro, International, Public, Monetary, Taxes, Finance | v = u + β v | Beatles | Boston Argentina
May 31 • 38 tweets • 13 min read
Excited to FINALLY release toughest+most rewarding paper I've worked on...

….we attack a 150 year old Walras question that's gone unanswered, not for lack of trying (Hicks, Samuelson, Arrow; our chances?😱)...

Q: Is the market equilibrium stable or unstable?¯\_(ツ)_/¯
🧵Image Not an abstract question… General Equilibrium (GE) is applied in trade, growth, public finance, macro, IO, development...

Question is not if equilibrium exist: that was settled triumphantly by Arrow, Debreu, McKenzie, but...

What good is it if we don't get there?
Jun 9, 2025 • 15 tweets • 3 min read
🚨New paper with @veroguerrieri & @guido_lorenzoni

Can lack of coordination across central banks lead to higher inflation?

Yes, we show. Especially in response to global supply shocks.

1/n🧵 Image This flips the usual narrative.
In standard models, central banks over-tighten in response to global supply shocks—trying to appreciate their currencies and lower import prices.
That logic doesn’t survive global input markets.
May 12, 2025 • 16 tweets • 5 min read
What should the Fed do with Trump Tariffs?

New paper on 'Monetary Policy in Times of Tariffs' with Guido Lorenzoni & Veronica Guerrieri (link at end)

We show the simplest most intuitive way to approach tariffs is actually correct:

Tariffs = textbook cost-push shock

🧵1/NWe study the optimal monetary policy response to the imposition of tariffs in a model with imported intermediate inputs. In a simple open-economy framework, we show that a tariff maps exactly into a cost-push shock in the standard closed-economy New Keynesian model, shifting the Phillips curve upward. We then characterize optimal monetary policy, showing that it partially accommodates the shock to smooth the transition to a more distorted long-run equilibrium—at the cost of higher short-run inflation.
Image The Fed recently hit the pause button on adjusting rates due to tariffs. A month ago Fed Chair Powell said:

“We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension.” (Speech at Economic Club of Chicago, April 16)

2/N
Apr 14, 2025 • 14 tweets • 4 min read
How Tariffs Affect Trade Deficits...

... a new paper with amazing trade economist Arnaud Costinot.

Many politicians and the general public expect tariffs to reduce imports lower imports and thus work to close a trade deficit.

Economists typically say "not so fast"...

🧵1/n Image ... Tariffs indirectly affect exports in general equilibrium!

Macro: trade deficit are about saving vs investment choices, which seems orthogonal to tariffs. (Are they?)

These economist viewpoints are on the right track, but needs further elaboration and caveats.

2/n
Jan 16, 2024 • 13 tweets • 6 min read
On my way back from giving this talk. One thing I enjoyed adding last moment are quotes from the original Phelps 1958 + Samuelson-Solow 1960.

A few tweets below to showcase these quotes and explain why I found them revealing...

Link to slides: dropbox.com/scl/fi/e12trr1…

1/n x.com/IvanWerning/st… First up, original Phillips 1958 (crazy career and life, New Zealander, crocodile hunter, POW in WWII, engineer, turned sociologist, turned economist...)

Very first page he highlights wage growth is nonlinear and depends on more than one thing: NOT A CURVE damn it!...

2/n Image
Aug 18, 2023 • 20 tweets • 5 min read
💵Crónica de una Dolarización Anunciada💵

¿Cuál es el efecto de anunciar una dolarización no inmediata? (con pocos dólares!)

Tema caliente, pero mejor estudiarlo con la cabeza fría.
Te guste la dolarización o no... o ¿no?

Paper:

(pa'🇦🇷 o muy curiosos) https://t.co/xvUf0puec0dropbox.com/scl/fi/0wqfsx9…
Image Abro hilo...

Escena: Un país decide dolarizar, pero a falta de dólares en arcas del Estado, posterga el canje oficial pesos por dólares. Promete realizarlo en una fecha futura (fija por un periodo).

¡Cualquier parecido con la realidad es pura coincidencia! 🤣

Algo crucial...
Jun 2, 2023 • 29 tweets • 6 min read
What are the costs and benefits of giving up your own currency to adopt a foreign one? Of "Dollarizing"?💵

Ecuador, El Salvador, Zimbabwe did it in 2000s. Panama way back. Argentina tangoed with it and recent proposals have gained traction.

A thread on new 🇦🇷⭐️⭐️⭐️paper... Image Two well-known costs are...

1. the transfer of seignorage to foreigners (US with dollar)

2. losing monetary policy independence to stabilize shocks

A great discussion on why seignorage is not trivial is provided by Fischer in this old paper. Image
May 7, 2023 • 15 tweets • 3 min read
Short thread on markups and inflation---dismissive version... greedflation 🎩

Markup rising is not my go to explanation for inflation these days, but I don't think it is logically wrong.

Critics make good points, but some gaps and confusion I think prevails the discussion. First of all, in my view, increase in markups can logically fuel inflation. I don't just mean mechanically raise a few prices of those markup increases, but also leading to other prices and wages to rise, persistently.
Apr 30, 2023 • 12 tweets • 3 min read
Fauci interview “we should have listened to economists”

Painfully takes me back to early 2020…

My coauthors Acemoglu Chernozhukov Whinston and I put out a paper studying costs vs benefits and plus one overlooked essential economic idea: Targeting.

Arguments like these were well received by most economists, rationally considered and discussed. Many other economists made great contributions, especially as data became available.
Apr 6, 2023 • 37 tweets • 8 min read
Inflation, what is its most proximate cause? What is the right general framework to think about this messy phenomenon?

Very excited to put out this new paper exploring a generalized "conflict" perspective as the right answer.

Paper here: economics.mit.edu/sites/default/…

🧵a thread... Image (I release it today because I will present this today at 11 ET in a webinar, details down below)

This is very much a conceptual paper. Economists use certain lenses, frameworks or models to think about the world and policy. We need that!
Jan 31, 2023 • 11 tweets • 4 min read
Don't kid yourself: policy runs on theories (AKA "ideas for how things work").

Famous Keynes quote captures this and I can easily provide many recent examples. We need to interpret the data!

Let me offer a quick theoretical lens on the latest wage growth numbers. Early on in the pick up of inflation, prices outpaced wages on average, so real wages fell.

It is natural to expect wages to bounce back. A standard wage-price feedback. Scarier name for it is "Wage Price Spiral". Image
Jan 3, 2023 • 6 tweets • 2 min read
Nice thread by @R2Rsquared discussed the Gali-Gertler-Sbordone theory that a low labor wedge summons higher coming inflation, and how this may be at odds with the data.

Interestingly, our recent paper with @guido_lorenzoni does not make similar predictions. Indeed we show a... ... that a inflation may first rise, faster than wages, lowering the real wage (and labor share), followed by a fall in price inflation as wages rise and the real wage catch back up. So the opposite can happen. This depends on parameters and shock.

Dec 31, 2022 • 7 tweets • 3 min read
Olivier is making an important point that inflation comes from distributional conflict, but getting a lot of pushback. In my view misplaced.

This prompts me to share some research that explores this view of inflation with Guido Lorenzoni. The analysis is done with a completely standard component of a macro New Keynesian (Calvo) model, and could be adapted to many other settings.

Inflation emerges from wage and price setters disagreeing on W/P aimed for and try to outdo each other, pushing up nominal prices/wages.
Dec 16, 2022 • 34 tweets • 10 min read
I wanted to make public 3 lectures in open economy macro that I had the pleasure to give at CREI Barcelona (100% based on joint work with Emmanuel Farhi).

Topics: Optimal Currency Areas, Fiscal Unions, Global Financial Cycle, Capital Controls, Mobility, Macropru policies.
1/n🧵 Image I hope to have a manuscript in a few months, for now I will put the slides up at the end of this thread.

Here is a quick summary of what you can find.

The goal is to think of some old and new questions with a new perspective. Deepening previous insights and providing new ones. Image
May 16, 2022 • 33 tweets • 6 min read
It is an absolute pleasure to release this new work, joint with the great Emmanuel Farhi and Alan Olivi: "Price Theory for Incomplete Markets" (the title is a wink at my alma mater).

At long last, as it has been a very long haul.

A brief thread 1/n drive.google.com/file/d/1yi8p5z…Image Demand Theory is a classical centerpiece in Economics. It describes rational behavior in competitive Walrasian markets.

Terrific for static settings! 2/n
Jul 7, 2020 • 13 tweets • 3 min read
Modern IO ---> Macro!

Monopolistic competition reigns supreme in macro, trade, growth etc., but what about more realistic dynamic oligopolistic scenarios?

Olivier Wang (NYU Stern) will present our paper at NBER SI session. Link in next tweet. Short thread below. 1/n Image YouTube Stream, presentation at 12:45 ET:
youtube.com/watch?v=7p6jlI…

Here is the program
conference.nber.org/sched/SI20EFCE

2/n