Working Papers:
Forbearance vs foreclosure in a general equilibrium model,
with Patrizio Tirelli, (ECB Working Papers Series).
Abstract: We build a business cycle model characterized by endogenous firms dynamics, where banks may prefer debt renegotiation, i.e. non-performing exposures, to outright default of borrowers. We find that debt renegotiations, per se, do not have adverse effects in the event of financial crisis episodes, but a large share of non-performing firms is associated to a sharp deterioration of economic activity in two cases. First, if there are congestion effects in banks ability to monitor non-performing loans. Second, if such loans adversely affect the commercial banks’ moral hazard problem due to their opacity. Aggressive interest rate reductions and quantitative easing limit defaults and the output contraction caused by a financial crisis, without adverse effects on the entry of new, more productive firms. Finally, the model shows that the observed long-run trend in the share of non-performing loans might be caused by the persistent reduction in technological advancements which drive firm entry rates and firms turnover.
Who Killed Business Dynamism in the U.S.?,
with Giorgio Massari and Patrizio Tirelli.
Abstract: We estimate a business cycle model with endogenous firm dynamics and stochastic growth. The decline in the entry rate was essentially the consequence of a persistent combination of adverse(favorable) productivity
shocks to potential entrants(incumbents). The model-predicted long-term increase in price markups did not play a significant role. The extensive margin allows to rationalize the procyclical pattern of TFP growth and its long-term decline. In spite of the "Schumpeterian" structure of the model, not all recessions had a "cleansing" effect, because the combination of shocks associated to the specific episodes had different effects on TFP dispersion.
Projects I am working on:
Endogenous firms dynamic, Solow residual and total factor productivity, with Patrizio Tirelli.
Endogenous Productivity, R&D Investment and Credit Market, with Giacomo Romanini.