Philip Barrett

About Me

I am an Economist at the International Monetary Fund, working in the Middle East and Central Asia Department. My interests are fiscal policy, international macroeconomics, and computational economics.


Working papers

Interest-Growth Differentials and Debt Limits in Advanced Economies IMF Working Paper: April 2018 Press coverage: Forbes, Fiscal Times

Do persistently low nominal interest rates mean that governments can safely borrow more? To addresses this question, I extend the model of Ghosh et al. (2013) to allow for persistent stochastic changes in nominal interest and growth rates. The key model parameter is the long-run difference between nominal interest and growth rates; if negative, maximum sustainable debts (debt limits) are unbounded. I show how both VAR- and spectral-based methods produce negative point estimates of this long-run differential, but cannot reject positive values at standard significance levels. I calibrate the model to the UK using positive but statistically plausible average interest-growth differentials. This produces debt limits which increase by only around 5% GDP as interest rates fall after 2008. In contrast, only a tiny change in the long-run average interest-growth differential – from the 95th to the 97.5th percentile of the distribution – is required to move average debt limits by the same amount.

Why are Countries’ Asset Portfolios Exposed to Nominal Exchange Rates? (With Jonathan Adams) IMF Working Paper: December 2017 Latest version: May 2018

Most countries hold large gross asset positions, lending in their domestic currency and borrowing in foreign currency. As a result, their balance sheets are exposed to nominal exchange rate movements. We argue that when asset markets are incomplete, nominal exchange rate exposure allows countries to partially insure against shocks that move real exchange rates. We demonstrate that asset market incompleteness which features a meaningful portfolio choice can simultaneously generate realistic gross asset positions and also resolve the Backus-Smith puzzle: that relative consumptions and real exchange rates are negatively correlated. We also show that local perturbation methods that use endogenous discount factors to stabilize models are inaccurate when the average and steady state interest rates differ, even when they correctly characterize the average portfolio holdings. To address this, we develop a novel global solution method to accurately solve the equilibrium portfolio problem.

Work in progress

Terms of Trade Shocks and Heterogeneous International Portfolio Positions (With Jonathan Adams) Latest version: March 2018

How do terms of trade shocks affect open economies? We use a panel of exogenous terms of trade shocks for 93 countries to estimate the dynamic effects on macroeconomic variables. We find that terms of trade shocks resemble wealth shocks: a terms of trade improvement increases consumption and investment by more than output and decreases net exports, contrary to prior evidence and standard theory. To explain this outcome, we also show that terms of trade improvements increase countries' net foreign asset position, due to valuation effects of nominal net assets. To make sense of these results, we augment a standard business cycle model with realistic international portfolio choice. We estimate the model for a large sample of countries, and show that it can replicate our empirical findings: terms of trade improvements look like wealth shocks, and their importance for business cycles is heterogeneous, depending on the country's international portfolio position.

The fiscal cost of conflict: Evidence from Afghanistan 2005-2016

Abstract coming soon.



University of Chicago

PhD, Economics June 2016

London School of Economics & Political Science

M.Sc. Econometrics & Mathematical Economics, with Distinction June 2008

University of Oxford

M.A. Mathematics, First Class June 2005

Full CV (pdf)



A Julia package to provide basic functionality for manipulating value sets in dynamic and repeated games. Currently includes: cnoversions between point and normal-distance forms, inner & outer approximate set sums, convex hulls, convex unions, vector addition, plotting, and cropping
Links:    Tutorial    github page


This project implements the Abreu-Sannikov (2013) method for computing sets of equilibrium values in two-player games of complete information. Interface in R, underlying code in C++.
Links:    Manual    User guide    Source package    Windows binaries    github page


R package to provide easy & fast Chebychev approximation of arbitrary 1- and 2-dimensional functions. Also generates shape-preserving 1-dimensional approximations.
Links:    Manual    User guide    Source package    Windows binaries    github page


R package to provide fast and accurate linear, bilinear and trilinear interpolation. Interface in R, underlying calculation in C++.
Links:    Manual    Source package    Windows binaries    github page

Other projects (available on request)

Extends the method of Judd, Yeltekin & Conklin (2006) to compute the full set of of exquilibria of a repeated game with a payoff-relevant, exogenous, publicly observed state.
Uses a similar method of Judd, Yeltekin & Conklin to solve a discrete-signal version of the classic two-player Green-Porter with incomplete information.