Published Papers

"The European Trust Crisis and the Rise of Populism" (with Yann Algan, Sergei Guriev and Elias Papaioannou), 2017, Brookings Papers on Economic Activity, 2018, 48(2): 309-400, CEPR Discussion Paper No. 12444, EBRD Working Paper No. 208. [ VOX, WSJ, FT, FOX BUSINESS, Pro-Market and Kathimerini.gr coverage]  

• We study the implications of the Great Recession for voting for anti-establishment parties, as well as for general trust and political attitudes, using regional data across Europe. We find a strong relationship between increases in unemployment and voting for non-mainstream, especially populist parties. Moreover, increases in unemployment go in tandem with a decline in trust in national and European political institutions, while we find much attenuated effects of unemployment on interpersonal trust. The correlation between unemployment and attitudes towards immigrants is muted, especially for their cultural impact. To advance on causality, we extract the component of increases in unemployment explained by the pre-crisis structure of the economy, in particular the share of construction in regional value added, which is strongly related both to build-up and the burst of the crisis. Our results imply that crisis-driven economic insecurity is a substantial driver of populism and political distrust.     

Download the online appendix    Download the data and programs

"Financial Flows and the International Monetary System" (with Hélène Rey), 2015, published in The Economic Journal, 125(584): 675-698, NBER Working Paper No. 21172. 

• We review the findings of the literature on the benefits of international financial flows and find that they are quantitatively elusive. We then present evidence on the existence of a global cycle in gross cross border flows, asset prices and leverage and discuss its impact on monetary policy autonomy across different exchange rate regimes. We focus in particular on the effect of US monetary policy shocks on the UK's financial conditions.

"Purchasing Power Parity in Tradable Goods" (with Ian Marsh and Lucio Sarno), 2012, in James, J., L. Sarno and I.W. Marsh (eds.) Handbook of Exchange Rates, London: Wiley

• A vast body of empirical research documents the linkage between nominal exchange rates and relative prices across countries. While excellent surveys exist in the literature on this topic, they focus largely on broad baskets of prices and, most commonly, on the consumer price index. This survey focuses on internationally tradable goods and services, rather than broad baskets that also include a substantial nontradable component. Specifically, the objective is to distill the literature on the properties of deviations from the law of one price applied to internationally tradable goods or sectors - i.e. the proposition that price levels of similar goods, expressed in a common currency, have a tendency to equalize over time. We conclude that a careful reading of the literature suggests that this notion of PPP holds in the long run for a broad range of tradable goods and services and for a broad set of currencies.

Policy Papers

"The Great Recession and the Rise of Populism", 2020, published in Intereconomics, 55(1): 17–21.

• Populist sentiment has been on the rise in Europe and the West for several years. The success of populist rhetoric in Europe is worrisome as it presents a threat to national and European institutions, the rule of law, and other fundamental free-market democratic institutions, such as freedom of the press and the independence of the judiciary system. Populism may also prove to be an impediment against further European integration by hindering the implementation of common social and economic policies. Are there common determinants of the recent populism surge among individual European countries or regions? The present contribution provides a positive answer to this question by focusing on the economic roots of populism.

Working Papers   

"The Origins of Commodity Price Fluctuations" (with Sarah Mouabbi and Adrien Rousset Planat)  [Le Monde coverage]

• We build novel indexes of commodity price developments by simulating news-reading. Our proposed computer-based, narrative approach is flexible, unified and spans the global commodity market, including energy, industrial and precious metals, and agricultural commodities. Empirical evidence and human readings of news articles indicate that our indexes capture commodity-price supply and demand components. Index-peaks track the post-crisis collapse of commodity markets, other market-specific developments, as well as the recent COVID-19 crisis. The richness of news content allows us to decompose the supply and demand indexes into a number of key determinants that shaped commodity markets since the beginning of the 21st century, including business cycle effects, geopolitical risk, natural disasters, and climate change considerations. Results reveal that the nature of commodity price movements matters for macroeconomic outcomes, firms' decisions, and asset prices.

"Unpacking Commodity Price Swings: Reading the News to Understand Inflation" (with Dimitris Malliaropulos and Filippos Petroulakis)

• The importance of commodities for monetary targets has long been highlighted. Characterizing commodity price movements and disentangling them into supply and demand components—and their drivers—is important because the nature of commodity price developments results in different effects for monetary outcomes. This discussion has become more topical as the world is experiencing very high inflation, likely due to a combination of supply and demand shocks, complicating monetary policy responses. We adapt the measure of Mouabbi, Passari and Rousset Planat (2023), which entails implementing an automated narrative methodology on news articles from the international press for the study of commodity behavior, to inflation forecasting. Our evidence suggests that supply and demand commodity indexes have different implications for inflation; while both net supply and net demand developments have inflationary effects, the effect of net demand is larger. We find that the effect of net supply becomes significant during the Covid-19 pandemic and capture well the turning points of inflation.  Additionally, we assess predictability across different inflation measures. 

"Financial Remittances and Gender Inequality" (with Dimitrios Minos)  draft coming soon

• The role of remittances has been drawing increased attention in the economics literature. As the decision to temporarily migrate and send or receive remittances is a hugely gendered process, we explore potential links between the inflow of remittances and their role in reducing gender inequalities in recipient countries. We compile a bilateral panel dataset at the country level for 130 countries to identify any links and potential mechanisms. Our results indicate that in countries that receive more remittances per capita female welfare tends to improve after controlling for a number of other factors. This result seems to be mainly driven by increased female schooling and reduced adolescent fertility. Potential mechanisms that we explore firstly include increased female decision making power within the household as women control the family budget and are actively deciding on spending patterns and secondly the concept of “social remittances” that implies that remitters may absorb skills, societal norms, ideology, knowledge, and customs from the destination countries and transfer them to the country of origin. We use the bilateral nature of our remittance data to link countries of origin with potential destinations to tease out some variation and uncover some of these mechanisms. The results seem to support the “social remittance” hypothesis as it does not seem to be the financial flow itself, but also where the money is coming from that matters. Further, we use a longitudinal household survey from Bangladesh covering about 6,000 households that contains information on remittances and the country of the remitter’s residence, as well as spending and decision making patterns within the household to further explore these mechanisms. The micro-data analysis that allows us to push on causality uncovers consistent patterns and further validates the “social remittances” channel.

"Exchange Rates and Commodity Prices"   new draft coming soon

• I build an exchange rate strategy that trades currencies conditional on changes in the global prices of commodity indices; hence, termed "commodity strategy". First, I document that commodity prices have significant out-of-sample predictive ability for the future exchange rates of several commodity exporters and importers at the daily frequency. However, I report that the reverse forecasting relationship does not survive out-of-sample testing. Second, I find a significant cross-sectional spread in both spot and excess returns of 6% p.a. between the currencies that are predicted to appreciate and those that are predicted to depreciate. The returns appear to be uncorrelated to those of popular exchange rate strategies such as the carry trade and currency momentum. Furthermore, the spread in returns is not explained by traditional risk factors; however, it is partly accounted for by the strategy's high transaction costs. Net profitability can be restored by either implementing a simple market timing rule or by investing in developed markets with low costs and high liquidity.

"In Quest for a Robust Model for the Exchange Rate: a Collective Approach"  (mimeo)

• I evaluate the predictive ability of a comprehensive set of empirical models of exchange rates, in addition to a standard technical trading strategy, on monthly exchange-rate returns for four developed and four emerging countries across different horizons. I implement a rolling window approach to the estimation and forecasting of the models, and construct an encompassing forecast. I also assess the economic value of the out-of-sample forecasting power of the empirical models using a simple dynamic allocation strategy, and find three key results: (1) the Taylor rule model consistently outperforms, economically and statistically, the interest rate parity, purchasing power parity, and monetary fundamental models as well as the technical trading strategy. (2) The technical rule has superior predictive power over the random walk benchmark. (3) There appears to be statistical gains from an unrestricted combined forecasting model. These results are robust across countries and horizons.

Work in Progress

"Are Commodity Markets Segmented? Understanding Cross-Asset Interdependencies Using Stochastic Spanning" (with Nikolas Topaloglou)