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PEJ Talks | Sérgio Rebelo | Economics Apprenticeship and Keeping Knowledge Alive

Biography

Kellogg School of Management
Tokai Bank Chair in International Finance, Professor of Finance

Sergio Rebelo is the Tokai Bank Chair in International Finance at the Kellogg School of Management, where he has served as Chair of the Finance Department.

Professor Rebelo does research on macroeconomics and international finance. He has studied the causes of business cycles, the impact of economic policy on economic growth, and the sources of exchange rate fluctuations. His research has been funded by the National Science Foundation, the World Bank, the Sloan Foundation, and the Olin Foundation.

He is a fellow of the Econometric Society, the National Bureau of Economic Research, and the Center for Economic Policy Research. He has been a member of the editorial board of various academic journals, including the American Economic Review, the European Economic Review, the Journal of Monetary Economics, and the Journal of Economic Growth.

He has won numerous teaching awards at the Kellogg School of Management, including the Executive Masters Program Outstanding Professor Award and the Professor of the Year Award.

Professor Rebelo has served as a consultant to the World Bank, the International Monetary Fund, the Board of Governors of the Federal Reserve System, the European Central Bank, the McKinsey Global Institute, the Global Markets Institute at Goldman Sachs, and other organizations. He received his Ph.D. in Economics from the University of Rochester.

  • Areas of Expertise
  • Emerging Markets
  • Globalization
  • International Economics
  • International Finance (Exchange Rates, Current Account)
  • Macroeconomics (Includes: Monetary Economics, Federal Reserve, Interest Rates)
  • Monetary Policy (Monetary Economics, Federal Reserve, Interest Rates)
  • Privatization

Education

  • PhD, 1989, Economics, University of Rochester
  • MA, 1987, Economics, University of Rochester
  • MS, 1985, Operations Research, Technical University of Lisbon
  • Licenciatura, 1981, Economics, Portuguese Catholic University

Academic Positions

  • Tokai Bank Distinguished Professor of International Finance, Kellogg School of Management, Northwestern University, 1997-present
  • Chair of Finance Department, Kellogg School of Management, Northwestern University, 2000-2002
  • Associate Professor, University of Rochester, 1992-1997
  • Director, Portuguese Catholic University, 1991-1992
  • Associate Professor of Finance, Kellogg School of Management, Northwestern University, 1991-1992
  • Director, Portuguese Catholic University, 1991-1992
  • Assistant Professor, Portuguese Catholic University, 1990-1992
  • Research Coordinator, Bank of Portugal, 1990-1992
  • Assistant Professor of Finance, Kellogg School of Management, Northwestern University, 1988-1991
  • Instructor, Portuguese Catholic University, 1981-1984

Editorial Positions

  • Associate Editor, Journal of Monetary Economics, 1995-Present
  • Advisory Board, Carnegie-Rochester Conference on Public Policy, 1992-1994
  • Associate Editor, Journal of the European Economic Association, 2003-2004
  • Associate Editor, Journal of Economic Growth, 1997-2004
  • Associate Editor, American Economic Review, 1995-2001
  • Associate Editor, European Economic Review, 1995-1998
  • Education Academic Positions Honors and Awards Editorial Positions

Read about executive education

Cases

Jaimovich, Nir and Sergio Rebelo. 2009. Can News about the Future Drive the Business Cycle?. American Economic Review. 9(4): 1097-1118.

We propose a model that generates an economic expansion following good news about future total factor productivity (TFP) or investment-specific technical change. The model has three key elements: variable capital utilization, adjustment costs to investment, and preferences that exhibit a weak short-run wealth effect on the labor supply. These preferences nest,as special cases, the two classes of utility functions most widely used in the business cycle literature. Our model generates recessions that resemble those of the post-war U.S. economy without relying on negative productivity shocks. Recessions are caused not by contemporaneous negative shocks but by lackluster news about future TFP or investment-specific technical change.

Burstein, Ariel, Martin S. Eichenbaum and Sergio Rebelo. 2007. Modeling Exchange Rate Pass Through After Large Devaluations. Journal of Monetary Economics. 54(2): 346-368.

Large devaluations are generally associated with large declines in real exchange rates. Burstein, Eichenbaum, and Rebelo (2005) argue that the primary force causing these declines is often the slow adjustment in the price of nontradable goods and services. We develop a model which embodies two complementary forces that account for the large declines in the real exchange rate that occur in the aftermath of large devaluations. The first force is sticky nontradable goods prices. Instead of simply assuming that nontradable goods prices are sticky, we develop conditions under which this phenomenon can emerge as an equilibrium outcome. The second force is the impact of real shocks that often accompany large devaluations. These real shocks lead to a decline in the price of nontradable goods relative to traded goods. We argue that sticky nontradable goods prices generally play an important role in explaining post-devaluation movements in real exchange rates. However, there are cases in which sticky nontradable goods prices are not sustainable as an equilibrium phenomenon. In these cases real shocks are the primary driver of real exchange rate movements.

Burstein, Ariel, Martin S. Eichenbaum and Sergio Rebelo. 2005. Large Devaluations and the Real Exchange Rate. Journal of Political Economy. 113(3): 742-784.

In this paper we argue that the primary force behind the large drop in real exchange rates that occurs after large devaluations is the slow adjustment in the price of nontradable goods and services. Our empirical analysis uses data from five large devaluation episodes: Argentina (2001), Brazil (1999), Korea (1997), Mexico (1994), and Thailand (1997). We conduct a detailed analysis of the Argentina case using disaggregated CPI data, data from our own survey of prices in Buenos Aires, and scanner data from supermarkets. We assess the robustness of our findings by studying large real-exchange-rate appreciations, medium devaluations, and small exchange-rate movements.

Rebelo, Sergio and Danyang Xie. 1999. On the Optimality of Interest Rate Smoothing. Journal of Monetary Economics. 43(2): 263-282.

This paper studies some continuous-time cash-in-advance models in which interest rate smoothing is optimal. We consider both deterministic and stochastic models. In the stochastic case we obtain two results of independent interest: (i) we study what is, to our knowledge, the only version of the neoclassical model under uncertainty that can be solved in closed form in continuous time; and (ii) we show how to characterize the competitive equilibrium of a stochastic continuous time model that cannot be computed by solving a planning problem. We also discuss the scope for monetary policy to improve welfare in an economy with a suboptimal real competitive equilibrium, focusing on the particular example of an economy with externalities.

Rebelo, Sergio. 2008. Managing Foreign Exchange Risk: Acquiring Nusantara Communications Inc. . Case 5-208-252 (KEL373).

California telecommunications company Wireworld is considering an acquisition of Nusantara Communications, a subsidiary of Indonesian conglomerate Bakrie & Brothers. Nusantara had invested $50 million in developing the advanced rural telephone system, which had the potential to provide much-needed telecommunications services to the mostly rural Indonesian population. If if were exported, the worldwide market for this product in the next five years was projected to be in the billions. Should Wireworld acquire this small company halfway around the world? Was it prepared to enter the Indonesian marketplace and beyond?

Jaimovich, Nir and Sergio Rebelo. 2009. Can News about the Future Drive the Business Cycle?. American Economic Review. 9(4): 1097-1118.

We propose a model that generates an economic expansion following good news about future total factor productivity (TFP) or investment-specific technical change. The model has three key elements: variable capital utilization, adjustment costs to investment, and preferences that exhibit a weak short-run wealth effect on the labor supply. These preferences nest,as special cases, the two classes of utility functions most widely used in the business cycle literature. Our model generates recessions that resemble those of the post-war U.S. economy without relying on negative productivity shocks. Recessions are caused not by contemporaneous negative shocks but by lackluster news about future TFP or investment-specific technical change.

Burstein, Ariel, Martin S. Eichenbaum and Sergio Rebelo. 2007. Modeling Exchange Rate Pass Through After Large Devaluations. Journal of Monetary Economics. 54(2): 346-368.

Large devaluations are generally associated with large declines in real exchange rates. Burstein, Eichenbaum, and Rebelo (2005) argue that the primary force causing these declines is often the slow adjustment in the price of nontradable goods and services. We develop a model which embodies two complementary forces that account for the large declines in the real exchange rate that occur in the aftermath of large devaluations. The first force is sticky nontradable goods prices. Instead of simply assuming that nontradable goods prices are sticky, we develop conditions under which this phenomenon can emerge as an equilibrium outcome. The second force is the impact of real shocks that often accompany large devaluations. These real shocks lead to a decline in the price of nontradable goods relative to traded goods. We argue that sticky nontradable goods prices generally play an important role in explaining post-devaluation movements in real exchange rates. However, there are cases in which sticky nontradable goods prices are not sustainable as an equilibrium phenomenon. In these cases real shocks are the primary driver of real exchange rate movements.

Burstein, Ariel, Martin S. Eichenbaum and Sergio Rebelo. 2005. Large Devaluations and the Real Exchange Rate. Journal of Political Economy. 113(3): 742-784.

In this paper we argue that the primary force behind the large drop in real exchange rates that occurs after large devaluations is the slow adjustment in the price of nontradable goods and services. Our empirical analysis uses data from five large devaluation episodes: Argentina (2001), Brazil (1999), Korea (1997), Mexico (1994), and Thailand (1997). We conduct a detailed analysis of the Argentina case using disaggregated CPI data, data from our own survey of prices in Buenos Aires, and scanner data from supermarkets. We assess the robustness of our findings by studying large real-exchange-rate appreciations, medium devaluations, and small exchange-rate movements.

Rebelo, Sergio and Danyang Xie. 1999. On the Optimality of Interest Rate Smoothing. Journal of Monetary Economics. 43(2): 263-282.

This paper studies some continuous-time cash-in-advance models in which interest rate smoothing is optimal. We consider both deterministic and stochastic models. In the stochastic case we obtain two results of independent interest: (i) we study what is, to our knowledge, the only version of the neoclassical model under uncertainty that can be solved in closed form in continuous time; and (ii) we show how to characterize the competitive equilibrium of a stochastic continuous time model that cannot be computed by solving a planning problem. We also discuss the scope for monetary policy to improve welfare in an economy with a suboptimal real competitive equilibrium, focusing on the particular example of an economy with externalities.

Rebelo, Sergio. 2008. Managing Foreign Exchange Risk: Acquiring Nusantara Communications Inc. . Case 5-208-252 (KEL373).

California telecommunications company Wireworld is considering an acquisition of Nusantara Communications, a subsidiary of Indonesian conglomerate Bakrie & Brothers. Nusantara had invested $50 million in developing the advanced rural telephone system, which had the potential to provide much-needed telecommunications services to the mostly rural Indonesian population. If if were exported, the worldwide market for this product in the next five years was projected to be in the billions. Should Wireworld acquire this small company halfway around the world? Was it prepared to enter the Indonesian marketplace and beyond?

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