The 10th PHBS International Workshop in Macroeconomics and Finance was held at Peking University HSBC Business School (PHBS) on June 24–25, 2026. Co-organized by the Sargent Institute of Quantitative Economics and Finance at PHBS (SIQEF) and the Department of Accountancy, Economics and Finance at the School of Business, Hong Kong Baptist University, the workshop brought together over 60 scholars from leading universities around the world. The event was also live-streamed, attracting more than 14,000 online views.

Attendees at the workshop

From left to right: Thomas J. Sargent and Wang Pengfei

Thomas J. Sargent, the 2011 Nobel laureate in economics and honorary director of SIQEF, delivered the opening remarks. He welcomed participants and expressed his hope for in-depth academic exchanges.

From left to right: Klaus Adam, Saki Bigio, and Gu Chao

Klaus Adam, professor at the University of Mannheim, presented a paper titled “The Misallocation Cost of Inflation: A Sufficient Statistics Approach.” Using UK CPI micro-price data, the paper estimates the misallocation costs of resources under different steady-state inflation rates. The optimal inflation rate is found to be around 1.8%, and aggregate productivity falls by about 1% when inflation is 8 percentage points above or below this rate—suggesting that traditional models tend to underestimate these costs.

Saki Bigio, associate professor at the University of California, Los Angeles, presented a paper titled “Scrambling for Dollars: International Liquidity, Banks, and Exchange Rates.” The paper develops a theory of exchange rate fluctuations arising from financial institutions' demand for liquid dollar assets. Due to settlement frictions in interbank markets, deviations from uncovered interest rate parity are driven primarily by differences in currency liquidity rather than risk compensation.

Gu Chao, professor at the University of Missouri, presented a paper titled “Monetary and Fiscal Policy: Some New Monetarist Arithmetic.” Following Sargent and Wallace's fiscal-monetary arithmetic, the paper studies two policy regimes in a New Monetarist framework. It shows that when long-run inflation or deficits are positive, fiscal-first regimes are more prone to multiple equilibria, endogenous dynamics and volatile responses to news; when they are negative, monetary-first regimes become more unstable.

From left to right, top to bottom: Albert Marcet, Dong Feng, Moritz Kuhn, and Liu Xuewen

Albert Marcet, professor at the Barcelona School of Economics, presented a paper titled “Catastrophic Equilibria: Uninsurable Risk, Inequality and Mobility.” The paper shows that incomplete markets and uncertainty can push individuals into poverty traps, resulting in extremely high inequality, low output, and a lack of intergenerational and long-term mobility, which implies that redistribution may reduce social exclusion without generating the usual efficiency-equity tradeoff.

Dong Feng, professor at Tsinghua University, presented his paper titled “Automation and Dynamic Efficiency: When Do Robots Benefit Every Generation?” Using overlapping generations’ models, the paper finds that cheaper robots achieve Pareto improvement for all generations only if the economy is dynamically inefficient. Under dynamic efficiency, the competitive equilibrium is Pareto optimal, and robot policies serve as intergenerational redistribution, with endogenous de-automation forming a self-correcting force

Moritz Kuhn, professor at the University of Mannheim, introduced a paper titled “Employment Stability, Earnings Dynamics, and Life-Cycle Savings.” The paper combines U.S. household microdata with a life-cycle search-and-saving model to interpret how heterogeneity in employment stability shapes earnings dynamics and wealth accumulation. It reveals that workers with more stable careers have steeper lifecycle earnings profiles and more wealth per dollar of income. Differences in earnings growth explain two-thirds of the differences in wealth accumulation.

Liu Xuewen, professor at the University of Hong Kong, presented a paper titled “From Savings Push to Demand Pull: Dynamic Consumption Externalities and Optimal Industrial Upgrading.” Based on a macroeconomic growth model with hierarchical preferences and learning-by-doing, the paper finds that consumption upgrading and industrial upgrading can form a dynamic positive feedback loop. The optimal policy should subsidize savings in the early stage and stimulate consumption in the later stage.

From left to right: Huo Zhen, Pooya Molavi, and Dong Ding

Huo Zhen, associate professor at Yale University, presented a paper titled “Micro Shocks and Macro Fluctuations in the Information Network.” Using EDGAR internet browsing logs to construct a firm-level attention network, the paper builds a noisy business cycle model with a directed information network. Theoretically, attention heterogeneity alone can generate granular aggregate fluctuations. Quantitative results demonstrate that the attention channel independently amplifies micro shocks, yet it partially dampens the firm-size channel due to their weak empirical correlation.

Pooya Molavi, assistant professor at Northwestern University, presented a paper titled “Learning and the Emergence of Nonlinearity in Financial Markets.” The authors introduce a general continuous-time filtering model to examine the pricing process in which investors continuously receive signals and update their beliefs under arbitrary assumptions about the distribution of fundamentals. It finds that negative skewness of beliefs is a necessary and sufficient condition for the “leverage effect,” and also explains the long memory of volatility and changes in inflation expectations sensitivity.

Dong Ding, assistant professor at Hong Kong Baptist University, introduced a paper titled “Belief Disagreement, Financial Speculation and Optimal Macroprudential Policy.” The paper characterizes the transmission channels through which household belief disagreements affect financial markets and the real economy. It shows that optimal macroprudential policy needs to balance the dual welfare effects of disagreement—namely, its impact on productivity and its exacerbation of inequality.

In his closing remarks, Wang Pengfei, Boya distinguished professor at Peking University and dean of PHBS, noted that the workshop presented cutting-edge research, providing important frameworks and perspectives for understanding socioeconomic issues. He thanked Professor Thomas J. Sargent for his participation and the organizing committee for their meticulous work. He also updated the attendees on the faculty's continued growth in research output and the steady improvement in student research capabilities, hoping for further international cooperation and academic exchange among faculty and students in the future.

The workshop was moderated by Shi Jiao, associate professor at PHBS; Wang Yicheng, assistant professor at PHBS; and Zhou Fei, assistant professor at Hong Kong Baptist University.

Group photo of participants

Following this productive workshop, PHBS will continue to collaborate with scholars around the world to explore frontier issues and contribute new momentum to academic innovation in macroeconomics and finance.

By Cai Hengyu, Annie Jin, Li Li, Lian Lili, Liu Haizhen, Wang Jiaxin, and Wang Yiding

Source：SIQEF, and PR & Media Office