Alberto F. Cavallo

Thomas S. Murphy Professor of Business Administration

Business, Government and the International Economy

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Business, Government and the International Economy

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Large Shocks Travel Fast

NBER Working Paper 31659

We leverage the inflation upswing of 2022 and various granular datasets to identify robust price-setting patterns following a large supply shock. We show that the frequency of price changes increases dramatically after a large shock. We set up a parsimonious New Keynesian model and calibrate it to fit the steady-state data before the shock. The model features a significant component of state-dependent decisions, implying that large cost shocks incite firms to react more swiftly than usual, resulting in a rapid pass-through to prices--large shocks travel fast. Understanding this feature is crucial for interpreting recent inflation dynamics.

The International Price of Remote Work

NBER Working Paper 29437

We use data from a large web-based job platform to study how the price of remote work is determined in a globalized labor market. In the platform, workers located around the world compete for jobs that can be done remotely. We document that, despite the global nature of the marketplace, the worker's country accounts for almost a third of the variance in remote wages. The observed wage differences are strongly correlated to the GDP per capita in the worker's location. This correlation is not accounted for by differences in workers' observable characteristics, occupations, or differences in the employers' locations. Instead, data on wage-histories indicate that remote wages are partly determined by the conditions that workers face in their local labor markets. We also document that, as with internationally traded goods, remote wages expressed in local currency move strongly with the dollar exchange rate of the worker's country, and are highly sensitive to changes in the wages of foreign competitors.

What Can Stockouts Tell Us about Inflation? Evidence from Online Micro Data

Journal of International Economics (forthcoming)

We use a detailed micro dataset on product availability to construct a direct high-frequency measure of consumer product shortages during the 2020--2022 pandemic. We document a widespread multi-fold rise in shortages in nearly all sectors early in the pandemic. Over time, the composition of shortages evolved from many temporary stockouts to mostly discontinued products, concentrated in fewer sectors. We show that unexpected product shortages have significant inflationary effects within three months. These effects are larger and more persistent for imported goods and import-intensive sectors. We develop a model of inventories in a sector facing both demand and cost disturbances, and use the observed joint dynamics of stockouts and prices to show that these effects can be associated with elevated costs of replenishing inventories and higher exposure to trade.

This work has been mentioned in PBS NewsHour, MarketWatch

Inflation with Covid Consumption Baskets

IMF Economic Review (forthcoming)

The Covid-19 Pandemic led to changes in expenditure patterns that can introduce significant bias in the measurement of Consumer Price Index (CPI) inflation. Using publicly-available data on card transactions, I update the official CPI weights and re-calculate inflation with Covid consumption baskets. I find that the US CPI underestimated the Covid inflation rate, as consumers spent relatively more on food with positive inflation, and less on transportation and categories experiencing deflation. The bias peaked in May, when US Covid annual inflation was 0.95% compared to just 0.13% in the CPI and low-income households were experiencing nearly twice as much inflation as those at the top of the income distribution. I find similar evidence of higher Covid inflation in 12 of 19 additional countries.

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This work has been mentioned in The New York Times, Bloomberg, Quartz, Financial Times, Financial Times II, Reuters, Washington Post, Folha de S Paolo, NPR, TIME, Bloomberg II,The Economist, The Wall Street Journal, The Economist II, The New York Times (opinion).

Alberto Cavallo is the Thomas S. Murphy Professor of Business Administration at Harvard Business School, where he teaches in the Business, Government, and the International Economy (BGIE) unit, a Faculty Research Fellow at the National Bureau of Economic Research, and a member of the Technical Advisory Committee of the US Bureau of Labor Statistics (BLS).

Cavallo's research focuses on the behavior of prices and its implications for macroeconomic measurement, models and policies. He pioneered the use of online data to measure inflation and conduct research on high-frequency pricing dynamics during his Ph.D. at Harvard. He created Inflacion Verdadera in 2007 to measure the real inflation rate in Argentina and co-founded The Billion Prices Project in 2008 to expand the measurement of online inflation globally. He also co-founded PriceStats in 2011, the leading private source of inflation and PPP statistics in over 25 countries.

Cavallo earned a Bachelor of Science in Economics with summa cum laude from the Universidad of San Andres in Buenos Aires in 2000. In 2005, he earned a Masters in Business Administration from MIT, and in 2010 he earned a PhD in Economics from Harvard University. He lives in Cambridge with his wife and two sons.

Featured Work

Large Shocks Travel Fast

NBER Working Paper 31659

The International Price of Remote Work

NBER Working Paper 29437

What Can Stockouts Tell Us about Inflation? Evidence from Online Micro Data

Journal of International Economics (forthcoming)

Inflation with Covid Consumption Baskets

IMF Economic Review (forthcoming)

Published Papers

Cavallo, Alberto, Francesco Lippi, and Ken Miyahara. "Inflation and Misallocation in New Keynesian Models." In ECB Forum on Central Banking 26-28 June 2023, Sintra, Portugal: Macroeconomic Stabilisation in a Volatile Inflation Environment. European Central Bank, forthcoming. View Details
Cavallo, Alberto, and Oleksiy Kryvtsov. "What Can Stockouts Tell Us About Inflation? Evidence from Online Micro Data." Journal of International Economics (forthcoming). (Pre-published online April 28, 2023.) View Details
Cavallo, Alberto. "Inflation with COVID Consumption Baskets." IMF Economic Review (forthcoming). (Pre-published online August 31, 2023.) View Details
Cavallo, Alberto, Robert C. Feenstra, and Robert Inklaar. "Product Variety, the Cost of Living, and Welfare Across Countries." American Economic Journal: Macroeconomics 15, no. 4 (October 2023): 40–66. View Details
Cavallo, Alberto, Gita Gopinath, Brent Neiman, and Jenny Tang. "Tariff Passthrough at the Border and at the Store: Evidence from U.S. Trade Policy." American Economic Review: Insights 3, no. 1 (March 2021). View Details
Cavallo, Alberto, and Diego Aparicio. "Targeted Price Controls on Supermarket Products." Review of Economics and Statistics 103, no. 1 (March 2021): 60–71. View Details
Cavallo, Alberto. "More Amazon Effects: Online Competition and Pricing Behaviors." Jackson Hole Economic Symposium Conference Proceedings (Federal Reserve Bank of Kansas City) (2019). View Details
Cavallo, Alberto, Erwin Diewert, Robert C. Feenstra, Robert Inklaar, and Marcel P. Timmer. "Using Online Prices for Measuring Real Consumption Across Countries." AEA Papers and Proceedings 108 (May 2018): 483–487. View Details
Cavallo, Alberto. "Scraped Data and Sticky Prices." Review of Economics and Statistics 100, no. 1 (March 2018): 105–119. View Details
Cavallo, Alberto, Guillermo Cruces, and Ricardo Perez-Truglia. "Inflation Expectations, Learning, and Supermarket Prices: Evidence from Survey Experiments." American Economic Journal: Macroeconomics 9, no. 3 (July 2017): 1–35. View Details
Cavallo, Alberto. "Are Online and Offline Prices Similar? Evidence from Large Multi-Channel Retailers." American Economic Review 107, no. 1 (January 2017): 283–303. View Details
Cavallo, Alberto, and Roberto Rigobon. "The Billion Prices Project: Using Online Prices for Inflation Measurement and Research." Journal of Economic Perspectives 30, no. 2 (Spring 2016): 151–178. View Details
Cavallo, Alberto, Guillermo Cruces, and Ricardo Perez-Truglia. "Learning from Potentially Biased Statistics: Household Inflation Perceptions and Expectations in Argentina." Brookings Papers on Economic Activity (Spring 2016): 59–108. View Details
Cavallo, Alberto, Brent Neiman, and Roberto Rigobon. "The Price Impact of Joining a Currency Union: Evidence from Latvia." IMF Economic Review 63, no. 2 (September 2015): 281–297. View Details
Borraz, Fernando, Alberto Cavallo, Roberto Rigobon, and Leandro Zipitria. "Distance and Political Boundaries: Estimating Border Effects under Inequality Constraints." International Journal of Finance & Economics 21, no. 1 (January 2016): 3–35. View Details
Cavallo, Alberto, Brent Neiman, and Roberto Rigobon. "Currency Unions, Product Introductions, and the Real Exchange Rate." Quarterly Journal of Economics 129, no. 2 (May 2014): 529–595. View Details
Cavallo, Alberto, Eduardo A. Cavallo, and Roberto Rigobon. "Prices and Supply Disruptions during Natural Disasters." Review of Income and Wealth 60, no. S2 (November 2014): S449–S471. View Details
Cavallo, Alberto. "Online and Official Price Indexes: Measuring Argentina's Inflation." Journal of Monetary Economics 60, no. 2 (March 2013): 152–165. View Details
Bordo, Michael D., Alberto Cavallo, and Christopher Meissner. "Sudden Stops: Determinants and Output Effects in the First Era of Globalization, 1880–1913." Journal of Development Economics 91, no. 2 (March 2010): 227–241. View Details
Cavallo, Alberto, and Eduardo Cavallo. "Are Crises Good for Long-term Growth? The Role of Political Institutions." Journal of Macroeconomics 32, no. 3 (September 2010): 838–857. View Details

Working Papers

Cavallo, Alberto, Francesco Lippi, and Ken Miyahara. "Large Shocks Travel Fast." NBER Working Paper Series, No. 31659, September 2023. View Details
Cavallo, Alberto, and Gaston Garcia Zavaleta. "Detecting Structural Breaks in Inflation Trends: A High-Frequency Approach." Working Paper, May 2023. (Preliminary draft.) View Details
Brinatti, Agostina, Alberto Cavallo, Javier Cravino, and Andres Drenik. "The International Price of Remote Work." NBER Working Paper Series, No. 29437, October 2021. (Revised November 2022.) View Details
Cavallo, Alberto, Brent Neiman, and Roberto Rigobon. "Real Exchange Rate Behavior: New Evidence from Matched Retail Goods." Harvard Business School Working Paper, No. 20-040, January 2019. View Details
Alcedo, Joel, Alberto Cavallo, Bricklin Dwyer, Prachi Mishra, and Antonio Spilimbergo. "E-commerce During COVID: Stylized Facts from 47 Economies." NBER Working Paper Series, No. 29729, February 2022. View Details
Cavallo, Alberto. "Measuring Venezuela's Inflation Using Crowdsourcing and Mobile Phones." 2018. Mimeo. View Details

Case and Teaching Materials

Cavallo, Alberto, and Stacy Straaberg. "FIELD Immersion 2022: Albuquerque, New Mexico." Harvard Business School Background Note 722-060, June 2022. View Details
Cavallo, Alberto. "International Macroeconomics with Global Crises." Harvard Business School Module Note 722-044, March 2022. View Details
Cavallo, Alberto, and Sophus A. Reinert. "The Global Great Depression, 1929-1939." Harvard Business School Teaching Note 722-054, March 2022. View Details
Cavallo, Alberto. "Getting Brexit Done." Harvard Business School Teaching Note 722-038, March 2022. View Details
Cavallo, Alberto. "Automercados Plaza's: Surviving Venezuela's Hyperinflation." Harvard Business School Teaching Note 722-043, March 2022. View Details
Cavallo, Alberto. "The Coronavirus (COVID-19) Pandemic and the Global Economy (A) and (B)." Harvard Business School Teaching Note 722-039, March 2022. View Details
Cavallo, Alberto. "BGIE Macro Data Repository." Harvard Business School Technical Note 722-037, January 2022. (Access the Data Repository here: https://sites.harvard.edu/bgie-data/.) View Details
Cavallo, Alberto, Sophus A. Reinert, and Federica Gabrieli. "The Global Great Depression, 1929-1939." Harvard Business School Case 722-034, November 2021. (Revised January 2023.) View Details
Cavallo, Alberto, and Christian Godwin. "The Coronavirus (COVID-19) Pandemic and the Global Economy (B)." Harvard Business School Supplement 721-434, February 2021. (Revised March 2023.) View Details
Cavallo, Alberto, and Tannya Cai. "HBS COVID-19 Global Policy Tracker." Harvard Business School Working Paper, No. 20-110, April 2020. (Available at www.globalpolicytracker.com.) View Details
Cavallo, Alberto, Mariana Cal, and Carla Larangeira. "Automercados Plaza's: Surviving Venezuela's Hyperinflation." Harvard Business School Case 721-014, October 2020. (Revised March 2022.) View Details
Cavallo, Alberto, and Christian Godwin. "The Coronavirus (COVID-19) Pandemic and the Global Economy (A)." Harvard Business School Case 720-031, May 2020. (Revised March 2022.) View Details
Cavallo, Alberto. "Getting Brexit Done." Harvard Business School Case 720-023, February 2020. (Revised January 2022.) View Details
Cavallo, Alberto, Mariana Cal, and Anne Laski. "The U.S. – China Trade War." Harvard Business School Case 719-034, February 2019. (Revised January 2022.) View Details
Cavallo, Alberto. "The U.S. – China Trade War." Harvard Business School Teaching Note 720-012, September 2019. (Revised January 2022.) View Details
Cavallo, Alberto, Matthew Weinzierl, and Robert Scherf. "India: State Capacity and Unity in Diversity." Harvard Business School Case 719-061, February 2019. (Revised March 2021.) View Details
Cavallo, Alberto, Kristin Fabbe, Mattias Fibiger, Jeremy Friedman, Reshmaan Hussam, Vincent Pons, and Matthew Weinzierl. "The BGIE Twenty (2024 version)." Harvard Business School Technical Note 718-032, December 2017. (Revised November 2023.) View Details
Cavallo, Alberto, Anne Laski, and Florencia Hnilo. "Economic Growth." Harvard Business School Technical Note 719-033, November 2018. (Revised December 2020.) View Details
Cavallo, Alberto. "Aggregate Demand and Aggregate Supply." Harvard Business School Technical Note 719-032, November 2018. View Details
Cavallo, Alberto. "Exchange Rates and the Trilemma." Harvard Business School Technical Note 719-031, November 2018. View Details
Di Tella, Rafael, Alberto Cavallo, and Aldo Sesia. "Hank and Nancy: The Subprime Crisis, the Run on Lehman and the Shadow Banks, and the Decision to Bail Out Wall Street." Harvard Business School Case 718-022, October 2017. (Revised November 2021.) View Details
Cavallo, Alberto, and Rafael Di Tella. "Hank and Nancy: The Subprime Crisis, the Run on Lehman and the Shadow Banks, and the Decision to Bailout Wall Street." Harvard Business School Teaching Note 719-010, September 2018. (Revised January 2022.) View Details

Awards & Honors

Winner of the 2018 Economics in Central Banking Award with Roberto Rigobon for the "Impact of the Billion Prices Project and PriceStats on Central Bank Policymaking."

Received a National Science Foundation Trans-Atlantic Platform-Digging into Data Grant, 2017–2019.

Received a National Bureau of Economic Research (NBER) Economics of Digitization Grant, 2015–2016.

Awarded the 2015 Roger F. Murray Prize from the Institute of Quantitative Finance.

Named Douglas Drane Career Development Chair in Information Technology and Management at MIT Sloan School of Management, 2015–2018.

Received a 3M Junior Faculty Grant from MIT Sloan School of Management, 2014–2016.

Named the Cecil and Ida Green Career Development Chair, MIT Sloan School of Management, 2012–2015.

Named BusinessWeek Innovator, February 2011.

Received a JFRAP Grant, MIT Sloan School of Management, 2011–2018.

Research selected for inclusion in the New York Times 10th Annual Year in Ideas Issue, 2010.

Received a Dissertation Completion Fellowship, Harvard University, 2009–2010.

Received the C.V. Starr Scholarship, Harvard University, 2009-2010.

Received a Real Estate Academic Initiative Grant, Harvard University, 2009.

Received a Warburg Funds Grant, Harvard University, Spring 2008–2009.

Received a Derek C. Bok Award for Excellence in Graduate Student Teaching of Undergraduates, Harvard University, Spring 2008.

Received a Derek C. Bok Award for Excellence in Graduate Student Teaching of Undergraduates, Harvard University, Fall 2007.

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In The News

Alberto F. Cavallo

Thomas S. Murphy Professor of Business Administration

Thomas S. Murphy Professor of Business Administration

In The News

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