Professor Atif Mian will present views on “Inequality and central banks” which is based on “Indebted demand”, a paper co-authored with Ludwig Straub (Harvard & NBER) and Amir Sufi (Chicago Booth & NBER).

Professor Mian and his co-authors propose a theory of indebted demand, capturing the idea that large debt burdens lower aggregate demand, and thus the natural rate of interest. At the core of the theory is the simple yet underappreciated observation that borrowers and savers differ in their marginal propensities to save out of permanent income. Embedding this insight in a two-agent perpetual-youth model, they find that recent trends in income inequality and financial deregulation lead to indebted household demand, pushing down the natural rate of interest.

Moreover, popular expansionary policies-such as accommodative monetary policy-generate a debt-financed short-run boom at the expense of indebted demand in the future. When demand is sufficiently indebted, the economy gets stuck in a debt-driven liquidity trap, or debt trap. Escaping a debt trap requires consideration of less conventional macroeconomic policies, such as those focused on redistribution or those reducing the structural sources of high inequality.

Atif Mian started his academic career completing a bachelors degree in Mathematics with Computer Science and a PhD in Economics from MIT. He has taught at the university of California, Berkeley, and the University of Chicago Booth School of Business.

His current work focuses on the deeper implications of rising inequality for the macroeconomy – including growth, financial markets, monetary policy and fiscal policy.

He co-founded the Center for Economic Research in Pakistan (CERP) in 2007, which is a non-profit research institute dedicated to economic research, teaching and innovation. He is also the director of the Julis-Rabinowitz Center for Public Policy and Finance at the Princeton School of Public and International Affairs.