Research

Publications

Colombo, V, 2013. Economic policy uncertainty in the US: Does it matter for the Euro Area?  Economics Letters, 121(1), 39-42, October 

Among the most cited Economic Letters Articles published since 2012

Abstract: We investigate the effects of a US economic policy uncertainty shock on some Euro area macroeconomic aggregates with a number of Structural VARs. We model the indicators of economic policy uncertainty recently developed by Baker, Bloom, and Davis (2013) jointly with a set of standard indicators of aggregate price and the business cycle for the two above indicated economic areas. According to our SVARs, a one standard deviation shock to US economic policy uncertainty leads to a statistically significant fall in the European industrial production and prices of -0.12% and  -0.06%, respectively.  The contribution of the US uncertainty shock on the European aggregates is shown to be quantitatively larger than the one exerted by an Euro area-specific uncertainty shock.

Caggiano, G., Castelnuovo, E., Colombo, V., Nodari, G., 2015. Estimating Fiscal Multipliers: News from a Nonlinear World, Economic Journal, 125(584), 746-776 

Media: The Conversation; RES Media Briefings; VOXEU.

Abstract: We estimate nonlinear VARs to assess to what extent fiscal spending multipliers are countercyclical in the United States. We deal with the issue of non-fundamentalness due to fiscal foresight by appealing to sums of revisions of expectations of fiscal expenditures. This measure of anticipated fiscal shocks is shown to carry valuable information about future dynamics of public spending. Results based on generalized impulse responses suggest that fiscal spending multipliers in recessions are greater than one, but not statistically larger than those in expansions. However, nonlinearities arise when focusing on "extreme" events, i.e., deep recessions vs. strong expansionary periods.

Colombo, V., and Paccagnini, A., 2020. Does the credit supply shock have asymmetric effects on macroeconomic variable?, Economics Letters,  188, March 

We investigate the role played by the credit supply shock across the business cycle in the U.S. over the period 1973 - 2018. We estimate a nonlinear VAR including nominal, real, monetary, and financial variables. According to our results, a credit supply shock triggers asymmetric and negative effects on macroeconomic variables.

We find that the state-dependent forecast error variance decomposition of industrial production, employment, and inflation due to the shock is from six to eight times

larger in recessions than in normal times.

Working Papers 

Opening the Red Budget Box: Nonlinear Effects of a Tax Shock in the UK  (R&R)

This paper studies the real effects of an exogenous UK tax change in recessions and expansions. The tax shock is identi.ed via the measure recently proposed by Cloyne (2013). Combining local projection techniques (Jordá, 2005) with smooth transition regressions (Granger and Teräsvirta, 1994), tax policy shock is found to affect UK macroeconomic variables depending on the phase of the business cycle the economy is when tax shock occurs. A positive tax shock in recessions triggers a large, persistent, negative, and statistically significant reaction in output, consumption, investment, imports, and government consumption. The results suggest that output tax multipliers are negative and above one (in absolute value) in recessions but not in expansions. The size and the sign of responses of a number of macroeconomic variables are also found to be state-contingent.

The Asymmetric Effects of Uncertainty Shocks, joint with Alessia Paccagnini (submitted)

We investigate the effects of financial uncertainty shocks on macroeconomic aggregates in the United States. Financial uncertainty is captured by appealing to some indicators recently developed. Relying on a nonlinear VAR, we isolate the effects of uncertainty in both recessionary and expansionary periods. As main findings, we report how uncertainty shocks have a negative macroeconomic impact across the business cycle. The asymmetric effects are persistent when we include the recent recession. To reduce the fall in macroeconomic variables, the "unconventional" monetary policy plays an important role.

Work in Progress

How does Unemployment React when the Financial System Plays Monopoly? (available upon request).

Uncertainty and Unemployment in the US: a Nonlinear Investigation.