Research
Publications
Global Risk and the Dollar
with Georgios Georgiadis & Gernot Müller, accepted at Journal of Monetary Economics
[Most recent version] [Online Appendix]
Abstract: The dollar is a safe-haven currency and appreciates when global risk goes up. We investigate the dollar’s role for the transmission of global risk to the world economy within a Bayesian proxy structural vector autoregressive model and a fully structural model of the global economy. We identify global risk shocks using high-frequency asset-price surprises around narratively selected events. Global risk shocks appreciate the dollar, and induce tighter global financial conditions and a synchronized contraction of world economic activity. We benchmark these effects against counterfactuals in which the dollar does not appreciate. In the absence of dollar appreciation, the contractionary impact of a global risk shock is much weaker, both in the rest of the world and the US. For the rest of the world, contractionary financial channels thus dominate expansionary expenditure switching when global risk rises and the dollar appreciates.
What goes around comes around: How large are spillbacks from US monetary policy?
with Max Breitenlechner & Georgios Georgiadis, Journal of Monetary Economics, 131, 45-60.
Abstract: Spillovers from US monetary policy entail spillbacks to the domestic economy. Applying counterfactual analyses in a Bayesian proxy structural vector-autoregressive model we find that spillbacks account for a non-trivial share of the slowdown in domestic real activity following a contractionary US monetary policy shock. Spillbacks materialize as a monetary policy tightening depresses foreign sales and valuations of US firms so that Tobin’s Q/cash flow and stock market wealth effects impinge on investment and consumption. Net trade does not contribute to spillbacks because US monetary policy affects exports and imports similarly. Geographically, spillbacks materialize through advanced rather than emerging market economies.
[Link to Working Paper]
Dominant-currency pricing and the global output spillovers from US dollar appreciation
with Georgios Georgiadis, Journal of International Economics, 133, 103537, 2021
Abstract: We test for the empirical relevance of partial and asymmetric dominant-currency pricing (DCP), the hypothesis that large but not necessarily identical shares of economies’ export and import prices are sticky in US dollar. We first set up a structural three-country New Keynesian dynamic stochastic general equilibrium model which nests DCP, producer-currency pricing and local-currency pricing. Under partial and asymmetric DCP, the output spillovers from shocks that appreciate the US dollar decline with an economy's export-import US dollar pricing share differential, i.e. the difference between the share of an economy's export and import prices that are sticky in US dollar. Underlying this prediction is a variation in an economy's net exports in response to US dollar appreciation that arises because the shares of export and import prices that are sticky in US dollar are different. We then provide evidence that this prediction from partial and asymmetric DCP is consistent with the data in a sample of up to 45 advanced and emerging market economies for the time period from 1995 to 2018. We moreover document that our findings are robust to considering US demand, US monetary policy, and exogenous exchange rate shocks as a trigger of US dollar appreciation, zooming in on the responses of economies’ exports and imports, as well as to accounting for the role of commodity trade in US dollar invoicing.
Working Papers
The energy price channel of (European) monetary policy
With Gökhan Ider, Alexander Kriwoluzky, and Frederik Kurcz, DIW Discussion Papers 2033, 2023,
Dollar trinity and the Global Financial Cycle
with Georgios Georgiadis & Gernot Müller, CEPR Discussion Paper No.18427, 2023
with Georgios Georgiadis, Sebastian Hildebrand, Martino Ricci, and Björn van Roye, ECB Working Paper No. 2021/2530
Current Research
Modelling US and Euro Area Monetary Policy - A heteroskedastic Bayesian Proxy VAR approach,
With Georgios Georgiadis and Fabrizio Venditti
Distributional spillover effects of US monetary policy
With Geraldine Dany-Knedlik & Jana Wittich
Policy Work
USUAL SUSPECTS? Coconspirators in the business of tax dodging
Study commissioned by the Greens/EFA Group in the European Parliament, 2017