Publications
Global supply chain pressures, inflation, and implications for monetary policy
Journal of International Money and Finance (forthcoming), with Guido Ascari and Dennis Bonam, 2024
How should policymakers respond to the recent surge in inflation? This paper examines the impact of global supply chain pressures on euro area inflation and the implications for monetary policy. Results from a Bayesian structural vector autoregressive model show that shocks to global supply chain pressures were the dominant driver of euro area inflation in 2022, and that these shocks have a highly persistent and hump-shaped impact on inflation. Furthermore, a two country New Keynesian model with international trade in intermediate goods shows that the optimal monetary policy response to global-supply-induced inflation is a non-linear function of the degree of global value chain participation.
The long-run effects of pandemics on inflation: Will this time be different?
Economics Letters, with Dennis Bonam, 2021
We find that past major pandemics have led to a significant decline in trend inflation in Europe that lasts for more than a decade. The effects of the COVID-19 pandemic on trend inflation could, however, be different this time around.
Asymmetric effects of uncertainty shocks: Normal times and financial disruptions are different
Journal of Macroeconomics, with Valeriu Nalban, 2021
We examine whether the response of the euro area economy to uncertainty shocks depends on financial conditions. We find strong evidence that uncertainty shocks have much more powerful effects on key macroeconomic variables in episodes marked by financial distress than in normal times. We also document that the recovery of economic activity following an adverse uncertainty shock is state dependent: it is gradual in normal times, but displays a more accelerated rebound when the shock hits during financial distress, reflecting monetary accommodation provided by the central bank. These findings are based on a non-linear data-driven model that accounts for regime switching and time-varying volatility. Our findings imply that whether financial markets are calm or distressed matters when it comes to the appropriate policy responses to uncertainty shocks.
The interaction between private sector and public sector labor markets: evidence from Romania
Economic Modelling, with Valeriu Nalban, 2021
We quantitatively assess the spillover effects originating from sectoral labor market shocks in an emerging economy (Romania). First, we estimate a time series model to recover data-driven evidence. Then, to blend data with theory, we develop a New Keynesian model which features public and private sector employees, who provide potentially substitutable labor services. In this environment, we allow for an active role of the government, which decides on the optimal amount of public employment, public wages and borrowing. The estimated structural model captures most empirical evidence: public job creation crowds out private sector employment and is contractionary, while increases in public wages lead to muted spillover effects; on the other hand, increases in both private employment and wages have sizable crowding in effects on public sector employees and are strongly expansionary. These results support active labor market policies targeting primarily the private sector developments.