Christian Proebsting

Associate Professor

KU Leuven

Department of Economics

Naamsestraat 69

3000 Leuven, Belgium


Phone: +32 49 186 84 99

I am an associate professor of economics at KU Leuven and a member of the editorial board of the IMF Economic Review.

After receiving my Ph.D. in Economics at the University of Michigan in 2016 I worked as a scientific collaborator at the Ecole Polytechnique Fédérale de Lausanne. Prior to starting my Ph.D., I graduated in International Economics from the University of Tuebingen in Germany.

My research interests lie in the area of international macroeconomics. I carry out data-driven research to understand how economic shocks, such as changes to fiscal policy or exchange rates, are transmitted through the economy and what mechanisms help economies adjust to these shocks. I use a variety of novel data sources to identify the local effects of economic shocks and then use quantitative, dynamic general equilibrium models to map these local effects into aggregate effects and to study their distributional consequences across households, regions and economic sectors.

Research fields: International Finance, Macroeconomics, International Trade

Working Papers

"Quantifying the Benefits of Labor Mobility in a Currency Union'' (with Christopher L. House and Linda L. Tesar) - Under revision for the Review of Economic Studies


Unemployment differentials are much greater between members of the euro area than between U.S. states. In both economies, net migration responds to unemployment differentials, though the response is smaller in the euro area compared to the United States. This paper explores to what extent the relative lack of labor mobility hinders macroeconomic stabilization in the euro area. We use a multi-country DSGE model with cross-border migration to evaluate Mundell’s hypothesis that labor mobility could stabilize unemployment rates and offset the cost of adopting a shared currency. Compared to a baseline calibrated to match bilateral migration flows in the euro area, a counter- factual that raises migration flows to U.S. levels suggests a reduction in unemployment differentials by about a third and a reduction in the costs of about 25-30 percent. Labor mobility is particularly effective in reducing these costs when prices and wages are sticky or economies are integrated through trade. We show that gains are unevenly distributed within countries, as gains entirely accrue to workers, whereas capital owners lose from higher labor mobility.


"Fiscal Policy, Net Exports and Relative Prices in a Currency Union" (with Luisa Lambertini) - American Economic Journal - Macroeconomics, accepted

Online Appendix Replication material

The hoped-for silver lining of euro-area austerity programs was to raise external competitiveness and improve current accounts. Using product- and industry-level data for 12 countries over 1999-2018, we show that reductions in government spending indeed reduce prices and wages, but only for products with low import content and industries with low export shares. This leads to asymmetric expenditure switching, with net exports improving through lower imports rather than higher exports. Adding home bias in government spending and limited factor mobility to a small-open DSGE model helps match these patterns, but also increases the output cost of correcting current account imbalances.

"Spending Multipliers and Market Segmentation" - Journal of Monetary Economics, 2022

Published Article Online Appendix Slides Replication material

I study the implications for government spending multipliers of two observations: Government demand is concentrated on few sectors and workers are sluggish to switch sectors. Together, they reduce crowding out because demand fluctuations in one sector have limited impact on production conditions in other sectors. Compared to a one-sector model, a model that captures input-output linkages and labor movements across 400 sectors in the U.S. raises multipliers by about 0.5 when preferences feature no wealth effects on labor supply and potentially by more in the presence of wealth effects. I provide empirical support by showing that relative prices respond to spending shocks and discuss the model’s implications for how the composition of stimulus packages affect the multiplier.

"Acquirers and Financial Constraints - Theory and Evidence from Emerging Markets" (with Rahul Mukherjee) - Journal of International Money and Finance, 2021

Published article Online Appendix Bibtex

Financial crises in emerging market economies induce diverging patterns of ownership stakes and subsequent divestiture rates among domestic and foreign acquirers. We rationalize these empirical findings in a tractable model where domestic acquirers are subject to borrowing constraints. In contrast to standard fire-sale effects operating for acquisitions by foreign acquirers, acquisition patterns of domestic firms are shaped by a novel counteracting selection effect, resulting in larger acquired stakes and more persistent ownership. We present empirical evidence consistent with the model’s predictions using a large dataset of domestic and cross-border emerging market acquisitions over 1990-2007. The estimated contribution of selection effects is quantitatively significant, leading to 12% increases in stakes, 25% increases in full acquisitions, and 30% declines in divestiture rates among crisis-time domestic acquisitions. Our results demonstrate how financial crises can have both short- and long-run effects through the market for corporate control, by changing the set of acquirers and how long acquirers keep ownership.

"Regional Effects of Exchange Rate Fluctuations" (with Christopher L. House and Linda L. Tesar) - Journal of Money, Credit and Banking, 2021

Published article Online Appendix Replication material Michigan News Bibtex

We exploit differences across U.S. states' exposure to trade to study the effects of changes in the exchange rate on economic activity. Across states, trade-weighted exchange rate depreciations are associated with increased state exports, reduced state unemployment and higher state hours worked. The effects are particularly strong during periods of economic slack. A multi-region model with inter-state trade and labor flows, calibrated to match state-level trade data and migration flows replicates the empirical relationship between exchange rates and unemployment. The high degree of interstate trade plays an important role in transmitting shocks across states in the first year, whereas interstate migration shapes cross-sectional patterns in later years. We use the model to study the regional effects of tariffs in the United States. The model suggests that a 25 percent Chinese import tariff on U.S. goods would be felt throughout the United States, even in states with small direct linkages to China, raising unemployment rates by 0.2 to 0.7 percentage points in the short run.

"Austerity in the Aftermath of the Great Recession'' (with Christopher L. House and Linda L. Tesar) - Journal of Monetary Economics, 2020

Published article Online Appendix Data Appendix Technical Appendix Vox column Bibtex

Cross-country differences in austerity, defined as government purchases below forecast, account for 75 percent of the observed cross-sectional variation in GDP in advanced economies during 2010-2014. Statistically, austerity is associated with lower GDP, lower inflation and higher net exports. A multi-country DSGE model calibrated to 29 advanced economies generates effects of austerity consistent with the data. Counterfactuals suggest that eliminating austerity would have substantially reduced output losses in Europe. Austerity was so contractionary that debt-to-GDP ratios in some countries increased as a result of endogenous reductions in GDP and tax revenue.

"Does Austerity Go Along With Internal Devaluations?" (with Luisa Lambertini) - IMF Economic Review, 2019

Published article Online Appendix Replication material Bibtex

Cuts to government spending rather than increases in consumption taxes are statistically associated with internal devaluations in the euro area during the period 2010-2014. Countries that cut spending experienced a decline in nominal wages, rising net exports, a fall in the relative price of non-tradables and a shift of consumption towards non-tradables. We show that these patterns are generally consistent with a neoclassical small open economy model with GHH preferences. The main remaining discrepancy between model and data is a missing terms of trade response in the data: Export prices did not decline in austere countries (nor did import prices), giving rise to asymmetric expenditure switching: Current account improvements are solely driven by falls in imports rather than increasing exports.

Work in Progress

"Czeching out the Impact of Exchange-Rate Interventions at the ZLB" (with Andrea Foschi, Christopher L. House and Linda L. Tesar)

Exchange-rate interventions are often considered as one of the few tools left for central banks when nominal interests are at the zero lower bound. In November 2013, the Czech national bank resorted to this tool to depreciate its currency by more than 7 percent. This paper examines the impact of this policy on the economy, both empirically and through a quantitative framework. We find that this unconventional policy had similar effects to conventional interest rate policies, as it raised both inflation and economic activity. Surprisingly, the depreciation had an effect on neither exports nor imports; a finding that we rationalize in a model where most trade is invoiced in foreign currency and is dominated by multinationals.

"Macroeconomic Implications of Cross-Border Merges and Acquisitions" (with Rahul Mukherjee)

"Frankenschock" (with Luisa Lambertini and Linda Tesar)