Interview: Prof. Reid about her visiting professorship

How was the teaching and the exchange with the students for you?

Prof. Monique Reid: First of all, teaching was wonderful because I’ve always taught pure economic students before I came to TU Darmstadt. I was faced with a different kind of students with a big variety of backgrounds here. They were very interested in the content and asked a lot of questions.

I put some of our theory but a lot more of policy questions because I sensed that the students wanted to understand the world, they go into in a very practical way where they are entrepreneurs. I started every lesson with news. I could not have known how things progress in the world, but it is like I designed it for this time, it worked so wonderfully for the course. It was not hard to find news that were relevant for the lecture and I in fact even found practical questions for the exams.

Because the students were so different regarding their backgrounds, I was challenged here and there about the assumption we make in our models.

There were lots of questions about policy and the real world. One of the things I noticed in Europe is that there is a very strong focus on climate change. In South Africa the focus is much more on inequality then climate change. When I spoke about what the role of a central bank should be, in terms of achieving goals, we had interesting debates about climate change and whether the central bank should take over responsibility or not.

What could you take away from TU Darmstadt besides your experience from your teaching and research projects?

There were a few interactions that were very interesting to me. For example, at the Science for Lunch Series. At first it was a little difficult because my German is at Level A2 but when they learned that I was English speaking, they were very accommodating. I was excited at the fact that the university was so deliberately trying to create a space for interdisciplinary exchange. It was a helpful platform to get to know people and expand my network. During the science for Lunch lectures, I learned that there are experts for textual analysis in the history department of TU Darmstadt. I can see that this methodical knowledge could become very helpful in the future for example if the South African Reserve Bank starts to change its focus on communication.

Which of your research projects could be advanced during your time at TU Darmstadt?

I had one of my students help me collect data for an infrastructure index. In South Africa every 5 years engineers, mainly civil engineers come together to do a report card and rate the different parts of the infrastructure in the country. But because there are not enough engineers in South Africa there were problems with the last report that might lead to no publication of a new infrastructure rating. This would be a problem because the last report is already relatively old. That is why we tried to use media reports that are identified by a machine learning algorithm as an indicator for infrastructure problems and thus make it easier and faster to detect infrastructure problems in South Africa.

And I also worked with a Canadian collaborator on a project about Inflation expectations for the South African Reserve Bank. They are interested in the question whether Inflation expectations are rational. At first, I wasn’t excited about the question, because it is a very old question, that has been discussed a lot. The assumption that (economic) decisions are rational has been criticized in the past, especially after the financial crisis in 2008. Surveys and psychological experiments have shown that there is no “homo economicus” who gathers every bit of information and optimizes decisions based on that. The same is true for inflation expectations, people are easily biased by historical numbers for inflation for example. But this project was very interesting from a methodological point of view and especially in terms of data. We had some disaggregated data which allowed us to look at how expectations are formed by different groups (for example low income vs. high income groups). The disaggregated data made it possible for us to look at and investigate on different ways of describing what is rational and thus opened a new perspective on this “old question”.

What is your next station and what tasks will you devote yourself to?

I am going to work with the South African Reserve Bank and I will be a lead economist in charge of doing research on monetary policy. Mostly I will work from Frankfurt in a hybrid setup.

The South African Reserve Bank is interested in inflation expectations and the role of communication. Both Christine Lagarde and Jerome Paul said that they were reducing communication about monetary policy because of the uncertainty they face and because of how people have taken this communication in the past. It was rather seen as a commitment in the past when things weren’t as uncertain as they are now.

I hope to be able to assist the South African Reserve Bank with the question of how much and about what they should be communicating regarding monetary policy.

Thank you very much for the interview and all the best for your future and your further work!