Chiara Fratto


Accounting for Post-Crisis Inflation and Employment: A Retro Analysis” (with H. Uhlig) – Review of Economic Dynamics (2020) Link to paper

Why was there no deflation and what accounts for inflation after 2008? Is the missing deflation puzzle an indictment of Phillips-curve-type analyses, as Hall (2011) has argued, or is all good and well, if one fixes the model appropriately with new features or those available prior to 2008, as Negro, Giannoni and Schorfheide (2015) have found? We argue that it is helpful to utilize Smets and Wouters (2007) in its original pre-2008 version, to shed light on this issue. We find that the missing deflation is not news. We find that shocks to price and wage markups alone are nearly enough to account for inflation before 2008, and that they do so substantially post 2007 as well. We confirm that the relationship described by the Phillips curve is weak after 2007, but it was also so before. As a consequence, we argue that asserted post-crisis model failures were just as visible pre-crisis already. If the missing deflation puzzle is an indictment of this model, then the missing explanation of inflation before the crisis should have been a pre-crisis indictment already.


“Unconventional Monetary Policies in Emerging Markets” (with B. Vannier, B. Mircheva, D. de Padua, and H. Poirson), IMF working paper No. 2021/014, Link to paper and data

The COVID-19 crisis induced an unprecedented launch of unconventional monetary policy through asset purchase programs (APPs) by emerging market and developing economies. This paper presents a new dataset of APP announcements and implementation from March until August 2020 for 27 emerging markets and 8 small advanced economies. APPs’ effects on bond yields, exchange rates, equities, and debt spreads are estimated using different methodologies. The results confirm that APPs were successful in significantly reducing bond yields in EMDEs, and these effects were stronger than those of policy rate cuts, suggesting that such UMP could be important tools for EMDEs during financial market stress.

“Distributional Effects of Monetary Policy” (with Bonifacio, Brandao-Marques, Budina, Csonto, Engler, Furceri, Igan, Mano, Narita, Omoev, Pasricha, Poirson Ward), IMF working paper No. 2021/201, Link to paper

As central banks across the globe have responded to the COVID-19 shock by rounds of extensive monetary loosening, concerns about their inequality impact have grown. But rising inequality has multiple causes and its relationship with monetary policy is complex. This paper highlights the channels through which monetary policy easing affect income and wealth distribution, and presents some quantitative findings about their importance. Key takeaways are: (i) central banks should remain focused on macro stability while continuing to improve public communications about distributional effects of monetary policy, and (ii) supportive fiscal policies and structural reforms can improve macroeconomic and distributional outcomes.

“The reallocative effects of mobility restrictions on workers and firms. An application to the West Bank” (2019, JMP)

I identify quasi-exogenous variation in the introduction of mobility restrictions in the West Bank during the Second Intifada (2000-2006) to study the distribution of residents, jobs and firms in response to changes in the commuters' market access. A village experiencing a loss in market access equivalent to a 10% increase in travel time towards all destinations on average suffered a loss of 0.3% in residents. However, it also experienced an increase of 0.3% in jobs, with the effect being particularly strong in wholesale and retail trade. The decrease in residents and the increase in jobs is reconciled with a decline in commuting of residents working outside the village. In a model of commuting, the sign of the effect of changes in commuting costs on residents and jobs depends on the initial direction of the commuting flows and the spatial sorting in the city.

“IT Sector in the West Bank, Barriers to Mobility and Knowledge Spillover” (with E. Giannone), World Bank Policy Research Working Paper; No. 9426 (2020), Link to paper

Despite the popular view that, with the advent of digital technologies, the world has become flat, geography still plays a key role in the economy. COVID-19 has brought even more awareness of this. This paper studies the impact of security measures that have reduced the mobility of people and goods on the industrial composition of the West Bank economy, and, in particular, on the development of the information and communications technology sector. The paper identifies different channels through which changes in market access due to the introduction of mobility restrictions can differentially affect industries. A newly designed survey instrument is used to identify and disentangle these mechanisms separately. This novel data set contains information on more than 500 establishments that are representative of different sectors of the economy, including information and communications technology, manufacturing, and retail trade. The analysis finds that the mobility restrictions involved a reallocation of resources toward the information and communications technology sector, as the industry was relatively less affected by the restrictions. Yet, the key role of the input-output linkages, strong dependence on local clients and suppliers, and deep interconnectedness of the information and communications technology sector with other domestic industries severely limit the extent to which the sector can benefit from the reduction in opportunity cost. An industrial strategy focusing on the harmonious development of the entire economy is advised, rather than targeting a specific industry in isolation from the rest.


Central banks should better communicate monetary policy’s distributional effects (with N. Budina, D. Igan, and H. Poirson), article on Finance and Development, 2021. Link