Research
Publications
- 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.
Previous WP version (June 219)
Companion dataset (txt format, semi-column separator, updated 02/2020)
Policy works
- 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.
SESFOD@10 – credit terms and conditions in euro-denominated securities financing and over-the-counter derivatives markets since 2013, ECB Economic Bulletin 6/2023, Box 1, with P. Molitor, S. Kordel, V. Macchiati, P. Kotlarz.
In this box I quantify the representativeness of the ECB SESFOD survey in two financial markets, namely the repo and the derivatives markets. SESFOD banks have a large footprint in both markets, especially in the repo segment. Teh representativess is lower in the derivatives market, especially in the over-the-counter/bilateral space.
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.
ACF ridgeplots (zipped pdfs) - DRAFT
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)
Cast out the pure? Inflation and relative prices on both sides of the Atlantic, with C. Osbat, M. Parker
What drives inflation -- domestic monetary policy or relative price shocks? During decades of low inflation in advanced economies, large relative price shocks - notably those related to energy prices - seem to have accounted for the bulk of inflation movements. We estimate the role of "pure" inflation versus relative prices, using an econometric modification of the approach proposed by Reis and Watson (2010). We find that relative prices substantially explain the rise in inflation during 2021 and 2022 and its subsequent fall. Our analysis finds little support for "pure" inflation being a material cause of recent inflation dynamics and arguments to that effect should, we contend, be cast out.
Euro Area Investment Funds Leverage, with L. Cappiello, O. Schwartze Blicke
In progress We combine granular information on the asset holdings of EA investment funds and transaction level information on repo borrowing and margin borrowing. We describe in detail the financial leverage behaviour of investment funds and how it evolves over the recent monetary policy hiking cycle. In the aggregate, we find low levels of financial leverage, although some financial stability risk is heavily clustered in few specific funds. For these funds, we study their centrality and net positions.
Financial conglomerates: blurred lines between banks and non banks
Early stage Combining detailed ownership data on EA financial entities and supervisory reports, it is possible to reconstruct the network and connections of financial conglomerates in the Euro Area. These conglomerates often include a large, supervised bank, and a host of NBFI entities, with a high level of specialisation. I investigate the synergies and interactions among these entities belonging to the same financial conglomerate.
Longer term projects
Financial leverage in the Non Bank Financial Intermediation (NBFI) sector, joint with L. Cappiello, C. Kaufmann, S. Kordel, P. Molitor
Sectoral inflation and optimal monetary policy
ML-VAR: a machine learning approach to time series macroeconometrics
Other writings
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.