Peter Paz

I do research in macro + monetary + banking economics | Previously @NYUFASEcon PhD, @EconomiaITAM_ graduate and @FCEUnmsm1 | 🇵🇪 🇲🇽 🇺🇸 🇪🇸

[Galo Nuño @NunoGalo]

Europe's has a big divide between fixed-rate and variable rate banking systems.

It offers a great opportunity to understand how loan pricing affects monetary policy transmission.

Here is a short 🧵 based on:

https://t.co/FOdObtKzXz

1/n (n=11)

[Jesús Fernández-Villaverde @JesusFerna7026]

Smartphones are not the explanation for the recent decline in fertility. Instead, they are an accelerator of deeper forces already at work.

Let’s start with the facts. Fertility is falling almost everywhere: in rich, middle-income, and poor countries; in secular and religious countries; and in countries with high and low levels of gender equality.

The decline accelerated around 2014. So, no country-specific explanation will work unless you are willing to believe that 200 distinct country-specific explanations arrived at roughly the same time.

Smartphones look like the obvious candidate: the first iPhone was released in 2007, and global adoption has been astonishingly fast.

Economists understand the first major decline in fertility in advanced economies, from 6 or 7 children per woman throughout most of human history to about 1.8, that occurred between the early 1800s and roughly 1970, well before smartphones. The main drivers were a sharp fall in child mortality (effective fertility was rarely above 3 and often close to 2) and the shift from a low-skill, rural agrarian economy to a high-skill, urban industrial one. We have quantitative models that fit these facts well.

Country-specific factors mattered too, of course. Proximity to low-fertility neighbors accelerated Hungary’s decline, while fragmented landowning structures accelerated France’s. But these were second-order mechanisms.

This is also why most economists long considered Paul Ehrlich’s doom scenarios implausible. We forecast that fertility in middle- and low-income economies would follow the same path as in the rich, probably faster, because reductions in child mortality reached India or Africa at lower income levels (medical technology is nearly universal, and most gains come from handwashing and cheap antibiotics, not Mayo Clinic-level care). Much of what we see in Africa or parts of Latin America today is still that old story.

But in the 1980s, a new pattern appeared. Japan and Italy fell below 1.8, the level we had thought was the new floor. By 1990, Japan was at 1.54 and Italy at 1.36.

This second fertility decline began in Japan and Italy earlier than elsewhere, driven by country-specific factors, but the underlying dynamics were widespread: secularization, an education arms race, expensive housing, the dissolution of old social networks, and the shift to a service economy in which women’s bargaining power within the household is higher. The U.S. lagged because secularization came later, suburban housing remained relatively cheap, and African American fertility was still high. U.S. demographic patterns are exceptional and skew how academics (most of whom are in the U.S.) and the New York Times see the world.

My best guess is that, without smartphones, Italy’s 2025 fertility rate would be about 1.24 rather than 1.14. I doubt anyone will document an effect larger than 0.1-0.2. Italy was at 1.19 in 1995, not far from today’s 1.14. The TFR is cyclical due to tempo effects, so I do not read too much into the rise between 1995 and 2007 or the decline from 1.27 in 2019 to 1.14 today. The direct effect of smartphones is not zero, but it is not, by itself, that large.

Where social media, in general, and smartphones, in particular, matter is in the diffusion of social norms. What would have taken 25 years now happens in 10. Social media are not the cause of fertility decline; modernity is. But they are a very fast accelerator.

That is why social media are a major part of the story behind Guatemala (yes, Guatemala) going from 3.8 children per woman in 2005 to 1.9 in 2025. Without them, Guatemala would also have reached 1.9, just 20 years later.

Modernity, in its current form, is incompatible with replacement-level fertility. By modernity, I do not mean capitalism: fertility fell earlier and faster in socialist economies than in market economies. Socialist Hungary fell below replacement in 1960, and socialist Czechoslovakia in 1966 (both experienced small, short-lived baby booms in the mid-1970s). By modernity, I mean a society organized around rational, large-scale systems and formalized knowledge.

Countries will not converge to the same fertility rate. East Asia is likely stuck near 1, possibly below, given its unbalanced gender norms and toxic education systems. Latin America faces the same gender problem plus weak growth prospects, so I expect something around 1.2. Northern Europe has more egalitarian family structures and might hold near 1.5. The very religious societies are probably the only ones that will sustain 1.8.

All of this could change with AI or changes in population composition. We will see. But on the current evidence, deep sub-replacement fertility is the “new new normal.” Unless we reorganize our societies, better learn to handle it as best we can.

[Galo Nuño @NunoGalo]

Im grateful to all academics and central bankers who have participated. The experience has been amazing, bringing together policy and research.

[Adrien Auclert @a_auclert]

Congratulations to my dear friend and coauthor @ludwigstraub being awarded the John Bates Clark medal.

Ludwig is a phenomenal macroeconomist with boundless energy, sharp vision, and deep insight. But also a wonderful human being who really cares about others. So well deserved !!

[Saki Bigio @SakiBigio]

Glad to see @NunoGalo among the most influential economists in Spain.

I learn a lot from our co-authorship and am glad others are learning from him, too.

Like in football, in economics, you can distinguish talent upon the first touch.

https://t.co/SBjWnpaNDn

[Gita Gopinath @GitaGopinath]

Well said, Chair Powell.

[Adrien Auclert @a_auclert]

I’m delighted to receive this award! Janet Yellen has been a great inspiration for me. Thank you to the @sffed for the honor and encouragement!

[Galo Nuño @NunoGalo]

This is a great speech for all of us who think that research is key for central banks

[Galo Nuño @NunoGalo]

A great summary of my work on r*!

[Bank of England @bankofengland]

The Monetary Policy Committee voted by a majority of 5-4 to cut interest rates to 4%.

Find out more in our #MonetaryPolicyReport https://t.co/jtJlDzsgEC

[Bank of England @bankofengland]

The #MonetaryPolicyReport press conference is about to start. Watch here: https://t.co/eu9ojUtRQf

[Jesús Fernández-Villaverde @JesusFerna7026]

Two weeks ago, at the NBER SI Micro Data and Macro Models group, I presented:

📉 “Navigating by Falling Stars: Monetary Policy with Fiscally Driven Natural Rates”

with Rodolfo Campos, @NunoGalo, and @PeterFPaz.

📄 Paper: https://t.co/ieCRw8WV0R

🎥 Video (starting at 1:12:00):
https://t.co/JgMk8BQDjQ

Key point: Monetary and fiscal policy cannot be separated once fiscal dynamics influence the natural rate of interest.

We show this in a HANK model, but the logic holds in OLG frameworks and beyond.

The paper also made me much more skeptical about Taylor rules.

Rules that avoid relying on an unobservable $r^*$—like Orphanides & Williams (2002)’s proposal (essentially price-level targeting)—look more realistic and are arguably closer to what central banks actually do.

💬 As always, constructive feedback is very welcome.

[Banco de España @BancoDeEspana]

El nuevo #bdePlanEstratégico guiará la transformación de la entidad con la mirada puesta en 2030 y basada en cuatro pilares fundamentales: Transformación Cultural y Organizativa, Tecnología, Talento y Transparencia. En el contexto de este Plan se ha aprobado una reestructuración organizativa en el Banco de España 👉 https://t.co/LGNXOVyGbF #bdePrensa

[Fundación BBVA @FundacionBBVA]

🏅 Premio Fronteras del Conocimiento a Olivier Blanchard @ojblanchard1 (@PSEinfo, @MIT), Jordi Galí (@CREI) y Michael Woodford (@Columbia) por su profunda influencia en la macroeconomía moderna y en el diseño de reglas de política monetaria y fiscal
https://t.co/7liFnv7ghG

[Noah Williams @Bellmanequation]

Morning presenters: Marco Bassetto, Julian Kozlowski, Lukas Schmid, Michaela Elfsbacka-Schmöller

[Noah Williams @Bellmanequation]

Afternoon presenters: Nicolas Caramp, Bill Branch, Rodolfo Campos, Jarda Borovicka

[Noah Williams @Bellmanequation]

Looking forward to our conference New Challenges for Fiscal & Monetary Policy next week in Miami @MiamiHerbert. Full program below, link to papers in the next tweet.

[Galo Nuño @NunoGalo]

Excelente artículo, que empieza hablando de mi abuelo (103 años) que mantiene, por el momento, salud física y lucidez mental.

¿Llegar a los 100 años y con buena calidad de vida? El análisis de cómo ocurre en España https://t.co/Ekyz38Zd9V

[Ricardo Lagos ⭐️⭐️⭐️ @Lagos_R_]

If you have read, written, or watched papers about monetary policy without money, it may be time to watch this: https://t.co/t3Ls18cCJD
(Thanks @SEDmeeting for the invitation and @EconomiaDiTella for the hospitality.)

[Ben Moll @ben_moll]

New paper: https://t.co/b5ZUFCXyDR