Wednesday, November 30, 2022 at 12:00pm to 1:30pm
Taper Hall (THH), 309K
3501 Trousdale Parkway, Los Angeles, CA 90089
Respondent: Jacob Soll, University Professor and Professor of Philosophy, History and Accounting
Wednesday, November 30, 2022
Taper Hall (THH) 309K
Please RSVP by Friday, September 30, 2022 to reserve a boxed lunch.
We are living in times of overlapping emergencies: Pandemic, climate change, and geopolitical confrontations have become a global reality. This has given rise to systemic, sectoral shocks, that interrupt the supply of goods and have resulted in price explosions and the global return of inflation. Inflation used to be understood as a predominantly macroeconomic phenomenon. As a result, our institutions of economic stabilization are designed to respond to rising prices by monetary or fiscal policy. Such a macroeconomic policy response is, however, a poorly targeted policy intervention in response to microeconomic shocks. This raises the question how economic policy can prepare for emergencies that result in price explosions. This paper proposes that we need to assess which prices are of systemic importance in the sense that if they explode they bear the potential of unsettling overall monetary stability. We devise a novel approach to identify systemically significant prices using a Leontief price model. We simulate how medium-run price volatility and price shocks of the magnitude in the COVID-19 inflation percolate through the US system of input-output relations and rank the resulting inflation impact. Sectors that unleash the greatest increase in inflation are systemically most important for monetary stability. We argue that new institutions and policies are needed to be able to stabilize systemically significant prices in a targeted fashion and hence increase the resilience of monetary economies.
This event is co-sponsored by the USC Center on Science, Technology, and Public Life, the Berggruen Institute, and the USC Center for International Studies, and the USC Department of Economics.