PEGFA Seminar Series 2024/25: Ines Heck & Alberto Botta

12th Nov 2024 1pm - 2:30pm

Greenwich Campus

SL107 & MS Teams

The Institute of Political Economy, Governance, Finance and Accountability (PEGFA) invites you to its Research Seminar Series 2024/25.

This Research Seminar will take place on 12th November at 1pm in SL107 & Online and will feature PEGFA speakers Ines Heck and Alberto Botta.

Ines Heck will be discussing 'The profits-prices spiral: measures to avoid inflation'.

"This report provides an analysis of the factors contributing to inflation in Europe, particularly focusing on the energy and food sectors. Following a period of low inflation, the resurgence of inflation post-COVID-19 and amid geopolitical tensions, particularly the Russian invasion of Ukraine, has drawn attention to the dynamics of price increases across various sectors. While supply-side shocks have significantly impacted prices, the contribution of profit inflation has been increasingly recognised as a key driver of the overall price level. Profit-induced inflation occurs alongside rising prices and a declining share of labour income, disproportionately affecting lower-income households who allocate a larger portion of their income to essential goods like energy and food. The report emphasises that energy price inflation has outstripped overall inflation rates, with significant variation across EU member states. In the food sector, market monopolisation and profiteering notably influence inflation, with a few dominant corporations wielding considerable pricing power across various stages of the food supply chain. To address these challenges, the report proposes a policy toolkit aimed at mitigating future inflationary shocks. This includes measures such as price controls, income support, excess profit taxation, and enhancing price transparency. By examining the intricate interplay between profits and inflation in essential sectors, the report aims to inform policymakers on effective strategies to manage and prevent future economic crises."

Alberto Botta will speak on "Back to fiscal rules: The insanity of normality, unless the rich pay for it!".

'With central banks and national governments returning to more conservative monetary and fiscal policies after Covid, the debate about the macroeconomic effects of fiscal rules has revamped. We address this topic via an extended version of the hybrid ABM-SFC model in Botta et al. (2024) that includes a Taylor-type monetary policy rule and a variety of fiscal rules aimed at reducing the public debt-to-GDP ratio. We compare spending-based fiscal rules vastly advocated by international economic institutions with wealth tax-based fiscal policies. We do this in the context of a modern financialized economy where securitization and complex financial products like Asset-Backed Securities (ABS) alter economic dynamics and the effectiveness of monetary policy in controlling inflation. We assume heterogeneous households to track how alternative fiscal strategies affect income and wealth inequality. Our findings are threefold. First, spending-based fiscal rules can reduce the debt-to-GDP ratio in the long term but at the cost of significantly higher unemployment and permanently lower real GDP. Second, wealth tax-based fiscal policies reduce public debt without harming economic performance. Third, perhaps unexpectedly, in a financialized economy, spending-based fiscal austerity may hurt the relative position of rich households in wealth distribution as much as a wealth tax does; this is due to capital losses that spending cuts may eventually induce in households’ financial wealth. In the end, wealth taxes are preferable to spending cuts, and the usual political opposition against them by the rich appears largely unfounded given their potential economic benefits compared to spending-based fiscal austerity.'

The MS Teams meeting can be accessed here.

We look forward to seeing you there!

The full schedule for the 2024-25 PEGFA Seminar Series can be found here.

BOOKING REQUIRED

Further details