It is Taxing to be Coherent: an award-winning paper in Money Macro & Finance

Ivan Shchapov, PhD student at Télécom Paris and CREST, supervised by David Bounie, receives the Peter Sinclair prize at MMF (Money Macro & Finance Society, UK) PhD 2024 Conference with the article It is Taxing to be Coherent. He answers our questions.

It is Taxing to be Coherent: what is it about?

It is Taxing to be Coherent deals with the problem of multiplicity of equilibria in models used to study monetary policy in a low interest rate environment. Modern macroeconomic monetary models that assume the interest rate of a central bank cannot go below zero suffer from the problem of multiplicity of equilibria and, thus, cannot be operational models of the economy. We show how such models can be ‘fixed’ to generate a unique solution using fiscal policy. We find that it is sufficient to assume that the government commits to sufficiently increasing its spending in response to declining output and inflation to generate a unique solution to the model. What is more important is that this assumption is not a mere theoretical abstraction but is also realistic.

What does the Prize mean to you?

The Peter Sinclair Prize matters to me for three reasons. First, it serves as an acknowledgment of the importance of my scientific work by one of the most prestigious macroeconomic societies in the UK. Second, to the best of my knowledge, I am the first researcher with European affiliation to receive this prize. I hope that my nomination for the prize will pave the way for other European researchers. Third, Peter Sinclair, the economist after whom the prize was named, was a fellow at Oxford’s Brasenose College, where I spent two years doing my Master’s. This fact makes the prize even more meaningful to me.

More generally, what does your research at Télécom Paris consist in?

My research is centred around three main topics: monetary policy, financial stability, and financial inclusion. In my other research papers, I seek to understand the implications of central bank policies on macroeconomic stability and their impact on financial stability. Besides that, I look into the impact of access to financial services on economic activity and transmission of monetary policy.