LATEST 

• New version August 2026: The Short Lags of Monetary Policy Buda, G., Carvalho, V. M., Corsetti, G., Duarte, J. B., Hansen, S., Moura, A. S., Ortiz, A., Rodrigo, T., Rodríguez Mora, J. V., Alves da Silva, G., (previously, Janeway Institute Working Paper 2308). 

We examine the transmission of monetary policy shocks to the macroeconomy at high frequency. To do so, we construct daily consumption and investment aggregates from bank transaction records and leverage administrative data on daily corporate sales and employment for Spain. We show that variables typically viewed as slow-moving, such as consumption and corporate sales, respond significantly within weeks. By contrast, aggregate employment and (monthly) consumer prices adjust only gradually. Disaggregating responses by sector, consumption category, and supply-chain distance from final demand, we find that fast demand adjustment is led by downstream sectors closely tied to consumption—especially luxury goods and durables—while upstream sectors respond more slowly but more persistently, ultimately accounting for the contraction in aggregate activity. Excess inventories accumulate first in retail and wholesale trade and only later among upstream manufacturers, reconciling the rapid adjustment of sales with the slower response of production and employment. Finally, we show that time aggregation to the quarterly frequency obscures the timing of monetary policy transmission by shifting estimated responses to longer horizons, whereas weekly and monthly aggregation preserve the patterns observed at daily frequency

• NEWLY UPDATED VERSION AUGUST 2026, ACCEPTED RESTUD, International Risk Sharing and Wealth Allocation with Higher Order Cumulants, with Anna Lipinska and Giovanni Lombardo. Online appendix..

We study international risk sharing across countries differing in size, openness, and productivity distributions, emphasizing fat tails. In a canonical IRBC model, safer economies benefit through asset and terms-of-trade revaluations, while riskier ones smooth consumption at the cost of lower wealth. Calibrated to non-Gaussian shocks country size and openness, the model predicts welfare gains between 0.09% and 3.0% of permanent consumption (median 0.34%). Assuming Gaussian shocks leaves the median gains virtually unchanged but reduces them for the most tail-exposed economies. In contrast, imposing equal country size and eliminating home bias sharply compresses the distribution of gains and lowers their overall magnitude. Clustering economies by openness, size, and higher moments aligns well with the cross-country distribution of gains

• NEW VERSION AUGUST 2026 U.S. Risk and Treasury Convenience, with Simon Lloyd, Emile Marin and Daniel Ostry

We document large, persistent shifts in investors’ assessment of U.S. risk relative to other advanced economies since the late 1990s, driven by {a rise in permanent risk but not} reflected in currency returns. We investigate this disconnect using a two-country, incomplete-markets framework with trade in risky assets, currencies, and a rich maturity structure of bonds which earn convenience yields. We estimate an equilibrium relationship among relative country risk, cross-border convenience yields, and currency returns. {Our estimates reveal that the rise in} relative permanent risk explains 68\% and 49\% of the fitted decline in long-maturity convenience yields over the periods 2002-2006 and 2010-2014, respectively.

• NEW VERSION July 2026 The theory of reserve accumulation, revisited, with Seung Hyun (Fred) Maeng,  first version Nov 2023.

We develop a model in which optimizing governments hold international reserves to reduce disruptions from belief-driven hikes in borrowing costs, which originate from post-auction uncertainty about debt repayment. Accumulating reserves can eliminate these self-fulfilling cost hikes, allowing governments to issue debt along the fundamental price schedule and thereby improve consumption smoothing. Quantitatively, the model predicts average reserves of 2.2% of GDP for short-term debt, and a lower level of 0.4% for long-term debt, as longer maturities provide some protection against these self-fulfilling hikes by reducing refinancing needs.

• April 21 2026. Presentation of the Florence Report - Reconfiguring Europe in a fractured global economy.

Voxeu.org: Reconfiguring Europe in a fractured global economy

• NEW VERSION April 2026 The Exchange Rate Insulation, Revisited, Giancarlo Corsetti, Keith Kuester, Gernot Müller, Sebastian Schmidt and Ben Schumann, CERP DP 15689. Revised December 2023. Voxeu column. Longer and more detailed version available as ECB WP 2630, revised December 2023

We confront the notion that flexible exchange rates insulate countries from external disturbances with new evidence for the euro area (EA) and 20 of its neighbors. Using high-frequency data, we first establish that countries with flexible exchange rates (“floats”) let their currencies depreciate in response to EA monetary policy shocks, while “pegs” raise interest rates. Yet at business cycle frequency, these depreciations do not translate into insulation: floats contract just as much as pegs—not only in response to monetary policy shocks but also to other shocks originating in the EA. This result appears puzzling in light of received wisdom, but we show that it can be rationalized within a state-of-the-art HANK model and flesh out the underlying transmission channels. 

• Debt | March 2026 IMF Finance and Development R&D Policy Coordination for Fractured Times Unstable geopolitics complicates effective coordination of fiscal and monetary policy GIANCARLO CORSETTI LEONARDO MELOSI

• A(I) morning at the museum: seeing models in paintings  Giancarlo Corsetti and Pedro Veiga Salgado

Using a XV century painting, we explore how AI can act as a translation device for economists, moving between paintings and mechanisms, models and images, equations and questions others can see. But it also prompts more general reflections, about bridging across disciplinary silos, and the future of the economic profession.

• New revised version of an older paper, January 2026 Exchange rates and monetary stabilization of tariff shocks, with Paul Bergin 

Home currency appreciation can neutralize the relative price distortions created by a tariff, moderating the rise in home import prices. A combination of domestic and foreign monetary policy appropriately managing the exchange rate can thus improve the trade-off between the objectives of supporting domestic demand and containing inflation. Using a New Keynesian two-country model, we analyze the role of the exchange rate in the optimal stabilization of unilateral home tariff shocks hitting, respectively, differentiated sticky-price goods and non-differentiated flexible price goods. In response to a tariff on the former, the cooperative Ramsey optimal monetary policy prescribes home appreciation, implemented mainly through a robust foreign monetary expansion. The monetary response in the home (tariff-imposing) country may be expansionary or contractionary, depending on trade elasticities, but it tends to be modest. If tariffs instead are imposed on flexible-price goods (commodities), the Ramsey optimal monetary response is the opposite, calling for a robust home monetary expansion containing home currency appreciation.

• Early draft A FTPL Approach to International Reserve Accumulation, December 2025, CEPR DP 21113 

• Revised Nov 12 2025: Trading blows: the exchange rate response to tariffs and retaliations, Daniel Ostry, Simon Lloyd and Giancarlo Corsetti, Bank of England Staff Working Paper No. 1,139, Published on 22 August 2025

This paper provides econometric evidence on how exchange rates respond to tariffs. We construct a new tariff-shock database, which captures tariff-related announcements, threats and implementations by the U.S., China, the Euro Area and Canada between 2018 and 2020, and in 2025. Our shock measure accounts for both the size of tariff rates and their economic relevance. Over the 2018-2020 period, we show that exchange rates reacted to U.S. tariff shocks in systematically different ways depending on retaliation: the U.S. dollar (USD) appreciated if the tariff was imposed unilaterally, but depreciated if other countries threatened to retaliate. In 2025, when nearly all U.S. tariff actions were met with retaliatory threats, the USD again depreciated. In contrast to 2018-2020, however, long-maturity U.S. Treasury yields rose in 2025, instead of fell—consistent with an interpretation of ‘Liberation Day’ as a reserve-currency shock. This may reflect that U.S. tariff actions in 2025 were significantly larger, more frequent and targeted a broader set of countries.

Voxeu: Tariffs and US dollar depreciations: Not so surprising after all, Giancarlo Corsetti Simon Lloyd Daniel Ostry. September 2025

LafonteBLOG: Tariffs and the US dollar: Economics was right, after all, Giancarlo Corsetti, 27 June 2025

• A revised (not final) draft Sept 15 2025: Global Value Chains and International Risk Sharing, with Lucio D’Aguanno, Aydan Dogan, Simon Lloyd, Rana Sajedi; first draft March 2024

New version coming at some point:

• Global Inflation and Exchange Rate Stabilization under a Dominant Currency, joint with Luca Dedola and Sylvain Leduc. 

Newly published/accepted papers

Books and E-books

Policy documents and columns

Cilento, Italy, 2013, Photo VC.