In this seminar Samuel Wills will provide an overview of his recent paper, ‘Optimal Monetary Responses to Oil Discoveries’. This paper studies how monetary policy should respond to news about an oil discovery, using a workhorse New Keynesian model. Good news about future production can create a recession today under exchange rate pegs and a simple Taylor rule, as seen in practice. This is explained by forward-looking inflation. Recession is avoided by a Taylor rule that accommodates changes in the natural level of output, which closely approximates optimal policy. Samuel Wills concludes that central banks have an incentive to exploit oil revenues by appreciating the terms of trade, creating “Dutch disease” and a deflationary bias which is overcome by committing to future policy.

Samuel Wills holds an ESRC Future Research Leaders fellowship at Oxford University. His work in macroeconomics and finance focuses on how countries can best manage their natural resource wealth. He has consulted to the International Monetary Fund, the World Bank and the governments of Ghana, Iraq, Libya and Uganda on natural resource policy; and has previously worked for the Bank of England, Australia’s Department of Prime Minister and Cabinet and McKinsey and Co. He completed a DPhil in Economics at Oxford in 2014 and also holds an MPhil in Economics (Oxford) and a BCom in Actuarial Studies and Finance (Honours I and University Medal, UNSW).

The CAMA Macroeconomics Brown Bag Seminars offer CAMA speakers, in particular PhD students, an opportunity to present their work in progress in front of their peers, and reputable visitors to showcase their work.