Working Papers
This paper investigates the structural drivers of the post-COVID inflation surge in the euro area by disentangling global and domestic shocks—on both the demand and supply sides—and assessing their effects on the persistent (trend) and transitory (gap) components of inflation. To achieve this, the paper combines three key features within a unified framework: (1) decomposition of long-term trends and business-cycle dynamics—such as potential GDP, trend inflation, the output gap, and the inflation gap; (2) modeling of timevarying volatility and fat-tailed distributions to accommodate extreme observations; and (3) structural shock identification, distinguishing shocks by their persistence (permanent vs. transitory) and origin (global vs. domestic, demand vs. supply, or energy-specific). The findings provide evidence that both global supply shocks and demand shocks are behind the post-COVID surge in euro area inflation. However, unlike the existing literature, I find that domestic supply shocks primarily feed into the persistent component of euro area inflation, raising trend inflation to 3% by 2022. In contrast, demand shocks—both domestic and global—manifest primarily in the transitory component (inflation gap), which explains approximately 85% of the total post-COVID increase in inflation.
Presented at: ASSET 2023, SAEe 2023, IAAE 2024, EEA-ESEM 2024.
URL to the paper (Conditionally accepted, Journal of Money, Credit and Banking)
This paper empirically confronts two different channels driving the 2000s boom-bust and the recent strong appreciation of house prices in Europe. The first channel, the fundamental view, is characterized by income and credit. While the expectational view is based on the expectations/beliefs of households and construction firms. I propose a Panel Favar model that can determine these views' importance. First, the results show that expectations play a significant role in short and medium-run fluctuations of house prices, explaining 30% and 20% respectively. Second, the effect of a household's belief shock on house prices depends on the level of mortgage credit liberalization. Specifically, in countries with looser credit conditions, household beliefs significantly impact house prices. While in countries with tighter credit conditions, the impact is not significant. Overall, this research provides new evidence that credit market conditions can influence the effect of expectations on house prices.
Presented at: IAAE 2022, Midwest Macro Meeting Fall 2022, SAEe 2022.
This paper explores the role of confidence measures in macroeconomic dynamics, focusing on their impact on unemployment in Europe. Using a mixed-frequency Panel FAVAR model with data from 22 European countries, we find that confidence shocks, which have no immediate effect on productivity or unemployment, are strongly correlated with non-technological shocks driving long-term unemployment dynamics. By applying a simultaneous identification approach with short- and long-run restrictions, we show that confidence shocks account for approximately 50% of unemployment variance in the medium run. These results support the “news” view of confidence and challenge both the traditional view that focuses solely on technological news and the conventional belief that technological news shocks are the primary drivers of business cycles, suggesting instead that confidence-related shocks linked to non-technological factors play a significant role. To validate our empirical findings, we develop a structural search and matching model, demonstrating that under adaptive learning, confidence shocks in the form of news can explain a substantial portion of unemployment fluctuations. This research shifts the focus from technological to confidence-related shocks, providing new insights into labor market dynamics.
Presented at: SAET 2023, IAAE 2024.
This paper explores the fundamental drivers of U.S. housing price exuberance using a Time-Varying Parameter VAR model with Stochastic Volatility, combined with the recursive right-tailed unit root testing framework of Phillips et al. (2015a,b). The goal is to identify the structural shocks behind periods of exuberance—characterized by rapid increases in house prices beyond their fundamental values—and provide deeper insights into their dynamics. While exuberance is often attributed to non-fundamental factors, our analysis shows that it can also emerge from fundamental shocks, particularly those related to credit supply and demand. The results demonstrate statistically significant differences in the first-moment dynamics of house prices to credit-related shocks during exuberant versus non-exuberant periods, highlighting their critical role in driving housing market fluctuations. Additionally, our approach reveals previously undetected periods of exuberance when house prices are conditioned on structural shocks, which remain hidden when analyzing the broader housing price dynamcis alone.
Presented at: .
Soon
Presented at: .
Work in progress
"The anatomy of the euro area economy: A structural TVP-SV BVAR model with trends and cycles" , joint with Niccolò Battistini (ECB), Johannes Gareis (ECB), Grigor Stoevsky (ECB)
"The asymmetries of the credit market; evidence from the USA" , joint with Skander Garchi Casal (Morgan Stanley )