Lanteri Brings Macroeconomic Expertise to Duke
16 September 2015 9:15AM
How can governments combat unemployment during recessions? Should the Federal Reserve raise interest rates? Almost everyone seems to have an opinion about economic issues such as these, but understanding how best to resolve them requires more insight.
New professor Andrea Lanteri aspires to answer these types of questions with macroeconomic models. He has joined the department from the London School of Economics, where he recently earned his Ph.D. in economics. His specialty is designing, solving, and simulating computational models of the macroeconomy.
“My research interests lie in business cycle theory, the understanding of why and how macroeconomic aggregates, such as gross domestic product, consumption, and investment, move up and down with booms and recessions,” he said.
According to Lanteri, an important challenge in modern macroeconomics is understanding how heterogeneous households and firms interact to generate the dynamics that are observed in macroeconomic aggregates. To address this, a large part of his research is devoted to building models that can incorporate such heterogeneity, particularly on the production side of the economy.
“I write mathematical models in which people and firms make their economic decisions about how much to consume or how much to invest and produce, and then interact with each other through markets,” he said. “Then I go to the computer and write a code that finds a ‘solution’ to these models and compares them with the data. When I have a ‘solution,’ I can ask the model quantitative questions, such as: By how much would investment fall in a large recession? What would be the welfare costs for households?”
Originally from Milan, Italy, Lanteri was first exposed to the world of academia at a young age. His parents, who are both academic mathematicians, instilled in him an appreciation for the practical applications of mathematics and intellectually stimulating research. His grandfather’s collection of books by early economists introduced him to the idea of addressing social questions with a scientific method, and from then on he was hooked.
“I was always going to be more of an applied guy, and economics seemed to require a good mix of ‘real world’ curiosity and mathematical rigor,” he said.
For example, Lanteri currently is working on a paper that applies to a very “empirically relevant scenario.” Joint with Esther Hauk and Albert Marcet from the Institute for Economic Analysis at the Spanish Council for Scientific Research, he is examining “how a government should conduct fiscal policy when it does not know what kind of shock is causing a recession.”
“If you think about the Great Recession, economists are in part still debating about its source, but in 2008-09 governments had to make quick decisions on taxes and spending,” he said. “Our model sheds light on how to set optimal fiscal policies when there are economic unknowns.”
Graduate students can learn more about Lanteri’s research specialties if they take his two Ph.D.-level modules in the spring. The assistant professor said students can expect to learn how to build and solve macroeconomic models with heterogeneous agents and how to use macroeconomic models to determine optimal fiscal policy.
Learn more about the Duke Economics faculty.