Research
Research
Financial frictions across the production network and the transmission of monetary policy (2025) - with S. Gebauer, F. Holm-Hadulla, M. Sirani
Summary: We investigate how production network linkages and sector-specific financial frictions influence monetary policy transmission. Using granular country-sector data for the euro area and input-output tables, we develop a novel set of empirical measures of upstream and downstream financial frictions. Our analysis reveals that financial frictions among upstream suppliers and downstream customers significantly impact firms' pricing and production decisions, thus affecting monetary policy transmission. Consistent with a sector-specific "cost channel" of monetary policy, upstream frictions raise sectoral prices, while downstream frictions trigger sectoral demand-channel effects in response to a monetary policy tightening. We develop a multi-sector model incorporating heterogeneity in sectoral financial frictions, deriving theoretical counterparts to our empirical measures. Our model corroborates our empirical findings through both analytical validation and simulation exercises.
Unlocking growth? European investment programs and firm performance (2025) - with D. Kapp, F. Vinci, R. Wojciechowski
Summary: This study evaluates the effectiveness of EU Cohesion Policy investment programmes using a novel dataset that links firm-level data from Orbis with project-level information from the Kohesio database. It focuses on two key questions: (1) Which firms receive EU funding? (2) How does receiving EU funding affect firm performance? By applying a logit model and a local projection difference-in-differences approach, we provide new insights into the allocation mechanisms of EU Cohesion Policy funds and their firm-level impact. Our findings show that funding tends to be allocated to promising firms, i.e. firms that already perform relatively well, and that firms receiving EU funding experience a persistent productivity increase of approximately 3% after 4 years, with smaller and more financially constrained firms experiencing relatively more sizeable improvements. Furthermore, our analysis reveals that Cohesion Policy funding is directed toward firms undergoing expansion and facing financial constraints, underscoring its role in addressing growth barriers.
Production networks and fiscal multiplier (2021)
[New draft available soon]
Summary: This paper examines the propagation of government spending shocks through production networks and their implications for the fiscal multiplier. Using contract-level procurement data from the U.S. Department of Defense (DoD) and data on the balance sheets and the supply chains of firms from Compustat, the results show that demand shocks travel from a firm to another via the network of customers-suppliers, giving rise to sizable network externalities. Taking explicitly into account such externalities, the size of the fiscal multiplier appears to be on the high end of the estimates available in the literature, with point estimates around 2 over a one year horizon.
Summary: In this paper we study the implications of non-performing loans (NPLs) for financial stability using a network-based approach. We combine loan-level data from DealScan and firm-level data from Orbis to reconstruct the global financial network from 1991 to 2016 and identify a series of stylized facts. Based on our empirical findings, we develop a model in which two types of agents, banks and firms, are linked in a network by their reciprocal claims and analyze how an increase in NPLs affects the stability of the system. We show that there exists a critical threshold of NPLs beyond which a systemic crisis occurs. This implies that small variations in the magnitude of the initial shock can have very different consequences at the aggregate level.
Data: the linking table between DealScan and Orbis is available upon request.
The cost of future policy: intertemporal public sector balance sheets in the G7 (2021) - with Y. Koshima, J. Harris and A. F. Tieman
Summary: This paper compiles the Intertemporal Public Sector Balance Sheets of G7 and examines their relationship with government borrowing costs. In 2018, all G7 countries have negative Intertemporal Net Financial Worth (INFW), falling short of their intertemporal budget constraint. A decomposition of the evolution of INFW shows that short-term fluctuations are mainly driven by fiscal policy changes, while in the long run demographic changes and health and pension obligations play a larger role. We find that on average a 10 percentage point of GDP increase in INFW reduces spreads of future 1-10 year rates of sovereign bonds by 2.8 basis points. This results suggest a possibility that financial markets pay attention to governments’ future policy obligations, in addition to the static assets and liabilities.
Indicators of granular exposures to climate-related physical risks for central banks’ analytical purposes (2023), in the IMF Book "Data for a Greener World" - with C. Willeke, M. Osiewicz, R. Peronaci, J. Herzberg, D. Aurouet, J. Franke and D. Del Giudice
The network origins of firms dynamics and business cycle
Energy shocks, corporate investment and potential implications for future EU competitiveness (2024) - ECB Economic Bulletin, Issue 8/2024
Climate change and monetary policy: preliminary considerations on the introduction of a green lending facility at the ECB (2023)