Guillermo Calvo, Distinguished Fellow 2023

Guillermo Calvo is Professor of Economics, International and Public Affairs and Director of the Program in Economic Policy Management (PEPM) at Columbia University since 2007. He is the former chief economist of the Inter-American Development Bank between 2001 and 2006, president of the Latin American and Caribbean Economic Association (LACEA) in 2000–2001, and president of the International Economic Association (IEA) between 2005 and 2008. He has received numerous awards and honors, including fellow of the National Academy of Economic Science in Argentina since 1993, fellow of the Econometric Society since 1995, the King Juan Carlos Prize in Economics in 2000, the LACEA Carlos Diaz Alejandro Prize in 2006, and Doctor Honoris Causa at Di Tella University in 2012.

Calvo is a world-wide recognized giant in Macroeconomics and International Economics. His theoretical and empirical contributions have been hugely influential in academia and his research and advice also had a great impact in policy discussions. His career path is unusual in that he remained intensely research-oriented, yet he held several positions at policy institutions.

Calvo's research has had an enormous impact. His contributions are prolific and many of his papers became landmark in the profession. Still early in his career, he wrote a paper that placed him as one of the early contributors to the literature on the time inconsistency of optimal policy, a literature that became central in macroeconomic research. Indeed, Calvo's 1978 Econometrica paper "On the Time Consistency of Optimal Policy in a Monetary Economy" came out on the heels of the Nobel Prize-winning 1977 paper by Kydland and Prescott. In a paper published in 1983, Calvo proposed a paradigm of nominal rigidities, now labeled “Calvo pricing”, that became a building block of New Keynesian models, a paradigm used in academic research and in central banks worldwide to inform policy decisions.

In international economics, Calvo has made seminal contributions. Particularly influential is his work on sovereign debt. His 1988 paper "Servicing the Debt: The Role of Exectations" is the first to introduce the possibility of self-fulfilling lack of trust in sovereign debt repayment as foundation for multiple equilibria. This idea of multiplicity is not only central to academic work on sovereign debt but it has also had huge policy impact, for example, being at the heart at Mario Draghi's policy stance of "whatever it takes" during the 2010s European debt crisis. Calvo has also made several other critical contributions on balance of payment crises, capital flows, and exchange rates. He was the first to highlight the volatility of capital flows, especially the fast reversals dubbed "sudden stops," and their dramatic effects on economies. In this area, his most influential papers are "Capital flows and capital-market crises: the simple economics of sudden stops" and "Varieties of Capital Market Crises." His work has also stressed the importance of considering financial frictions and bank balance sheets, an area that became very prolific after the Global Financial crisis in 2008–09. The more empirical side of his work with Carmen Reinhart and other co-authors has also been hugely influential, in suggesting the importance of macro-prudential policies for financial institutions.

In summary, Guillermo Calvo is a true leader in our profession, a standout academic who helped shape various fields of economics and also critically contributed to policy molding, especially but not only in Latin America. Calvo has inspired generations of students and colleagues and will keep inspiring many more to come.