Research

Research Interests

Publications 

This paper investigates the role of hysteresis in the long-term transmission of consolidations in a panel of 17 OECD countries. The evidence supports that the hysteresis of the labour market is the main driver of consolidations’ long-term effects: an increase in the rigidity of the labour market exacerbates and prolongs the contraction following tax-based consolidations, while it mutes the expansion following expenditure-based consolidations. In contrast, the response of productivity is irrelevant to the presence of the long-term scars.

This study provides new evidence on how labour market rigidities affect the transmission of fiscal consolidations using a sample of 17 OECD countries. Owing to a novel empirical approach, the outcomes of consolidations are modelled as a function of employment and wage rigidities. The evidence confirms that tax-based consolidations are distortionary, while expenditure-based consolidations have wealth effects. These effects are then magnified by flexible employment and rigid wages, while they are moderated by rigid employment and flexible wages. This indicates that labour market conditions influence how fiscal consolidation is propagated in the economy by affecting both the magnitude and the transmission channels of consolidation plans. This result has crucial policy implications and suggests that the design of consolidation plans should account for the labour market structure.

In this paper we investigate the effects of uncertainty shocks on the US daily online price index by Cavallo and Rigobon (2016) within a VAR framework. We find evidence that shocks increasing uncertainty dampen prices significantly. This result is robust to various changes to the baseline model and rejects the Upward Pricing Bias that is often found in the Sticky-Price DSGE literature. 

Working papers

In the policy debate on the effectiveness of the Global Financial Safety Net, concerns have been raised that expectations of adverse effects of IMF programmes may deter countries from asking for an IMF programme when they need one, a form of ‘IMF stigma’. We explore the existence of IMF financial market stigma using monthly data by estimating how and to which extent adverse market reactions to a programme materialise and how past experience with adverse market reactions affects subsequent IMF programme participation. Our results, derived with event history techniques and propensity score matching, indicate no role for ‘IMF stigma’ stemming from the fear of adverse market movements. Instead, we find evidence of ‘IMF recidivism’ driven by adverse selection and IMF conditionality. 

Work in progress

This paper presents an innovative method to estimate trend employment.We propose two major innovations, one statistical and one methodological. We perform a two-step estimation process in a state-space framework: first, we conduct the analysis separately by age cohort and gender, second, we aggregate the series estimated to obtain the population values. This procedure allows us to shape and customize the estimation method depending on the segment of the population. The second innovation regards the estimation process. We augment our state-space model à la Borio (2012) to include some proxies for the financial cycle. This reduces the indeterminacy that usually affects the estimation of potential variables, and lets us filter out the cyclical component, to obtain cleaner estimates of the long-term employment.


Conference and seminar presentations

2017

2015

Other Projects

2017