- Institutional integration and productivity growth: Evidence from the 1995 enlargement of the European Union, 2022 - European Economic Review, joint with N. Campos and F. Coricelli
This paper studies the productivity effects of integration deepening. The identification strategy exploits the 1995 European Union (EU) enlargement, when all candidate countries joined the Single Market but one — Norway — did not join the EU. Our synthetic difference-in-differences estimates on sectoral and regional data suggest had Norway chosen deeper integration, the average Norwegian region would have experienced an increase in yearly productivity growth of about 0.6 percentage points. This method also helps determining the sources of heterogeneity, apparently inherent to integration, highlighting higher costs of the missed deeper integration for more peripheral regions and industrial sector.
We study the parameter instability in the monetary policy rule followed by the US Federal Reserve Bank since WWII.We find evidence across a variety of econometric methods of fundamental instability, in particular on the parameter governing the reaction to inflation expectations – the Taylor Principle. We augment the monetary policy rule to account for liquidity conditions and find consistent violations of the Taylor Principle without sunspot inflation episodes. We study the presence of multiple regimes and find that when uncertainty and economic slowdown are looming the Fed reacts passively to expected inflation.
- Key linkages between banks and the non-bank financial sector, Financial Stability Review, May 2023, European Central Bank, Special Feature B, with Maciej Grodzicki, Benedikt Kagerer, Christoph Kaufmann, Francesca Lenoci, Luca Mingarelli, Cosimo Pancaro and Richard Senner
Banks are connected to non-bank financial intermediation (NBFI) sector entities via loans, securities and derivatives exposures, as well as funding dependencies. Linkages with the NBFI sector expose banks to liquidity, market and credit risks. Funding from NBFI entities would appear to be the most likely and strongest spillover channel, given that NBFI entities maintain their liquidity buffers primarily as deposits and very short-term repo transactions with banks. At the same time, direct credit exposures are smaller and are often related to NBFI entities associated with banking groups. Links with NBFI entities are highly concentrated in a small group of systemically important banks, whose sizeable capital and liquidity buffers are essential to mitigate spillover risks.
Work in progress
We investigate the evolution of persistence in post-WWII US inflation. Besides standard methods, we draw cutting edge methods from deep neural networks and leverage their flexibility in dealing with long trends and short swings to study inflation inertia. We consistently find evidence of decreasing persistence since the mid-90's, also controlling for trend inflation and commodities influence. The decrease pre-dates the onset of globalisation and thus points to longer term transformations unfolding in the US economy, such as structural change. Focusing solely on inflation data with a purely statistical analysis we find evidence of a long, slow trend of decreasing persistence in inflation dynamics, which has accelerated in the last two decades.
Short slides (Sept. '20)
We propose and study a model with liquid bonds, money, and illiquid assets. This simple set-up breaks the New Keynesian requirement for aggressive monetary policy. We study how liquidity affect portfolio choices and shock propagation: We find that inflation display higher inertia under a stable, accommodative monetary policy stance. We study how a liquidity dry-up propagates through the economy.
PSE Working Paper (Oct. 2020)
- Financial leverage in the Non Bank Financial Intermediation (NBFI) sector, joint with L. Cappiello, C. Kaufmann, S. Kordel, P. Molitor
Using large, granular transaction level data on repurchase agreements and buy sell backs we document the extent of financial leverage in the Euro Area investment fund segment. We combine the universe of transactions reported under the Securities Financing Transactions Regulation (SFTR) with fund-level data and document the level of outstanding repo borrowing, its maturity composition, its geographical and sectoral sources.
- State dependency of banks' regulatory capital requirements, joint with M. Behn
Leveraging supervisory data on EA banks, we document how credit institutions react to announced and implemented changes in capital requirements.
- Sectoral inflation and optimal monetary policy
Different industrial sectors have different pricing strategies, arising from a variety of sources. We analyse an economy with multiple sectors presenting heterogeneity in productivity (growth rate and magnitude) and in the frequency of price adjustment. Underlying structural change pushes a variation in the shares of such industries. Therefore, aggregate inflation results as a varying function of the industrial pricing behaviours. We derive optimal monetary policy and study inflation persistence properties in this framework.
We study how inflation effects differ along the income and wealth distributions in the Eurozone. Using identified monetary policy shocks, we also investigate how the ECB perturbs such distributions, and compute the short and long run efficacy of policy decisions conditional on the underlying distribution.
We reconstruct EU banks' ownership network at several degrees of depth and match it with loan-level data. We assess whether firms holding a bank's share enjoy more favourable credit conditions than non-shareholding firms and evaluate the magnitude of these advantage. Banks' credit being central to monetary policy transmission, we assess the distortion effect of preferential loans.
Longer term projects
Firms' liquidity, banking, and central bank's balance sheet
Tax incentives to firms' size and fiscal elusion
ML-VAR: a machine learning approach to time series macroeconometrics
Effects of labour market frictions and knowledge spillover on the structural change, 2015, written in partial fulfilment of ETE Master's Degree, under the supervision of Prof. Fabrizio Coricelli.
A simple two-sector model accounts for the effect of labour market frictions and sectoral productivity differentials on structural change dynamics, intended as industry labour share.