The Global Effects of Climateflation. SSRN Preprint, Jul. 2025. [Working paper version] [Slides]
Abstract
This paper examines the global transmission of temperature physical risks to commodity import prices and domestic prices. Global and country panel estimates indicate that higher extreme temperatures increase commodity prices of raw materials and food, providing evidence of a new channel of temperature-induced imported inflation. Temperature shock effects extend beyond a country’s own borders, as cross-border temperature spillovers weigh on import prices, producer prices, and consumer prices in the U.S. and key European economies. Their inflationary effects stand in contrast to downward price pressures from domestic shocks. Asymmetries in the responses to foreign temperature shocks arise from their sign: heat shocks have inflationary effects, affecting import and producer prices more, while cold shocks lead to deflationary pressures. These findings highlight how the effects of extreme temperatures can be transmitted internationally through commodity markets, revealing emerging sources of domestic inflation that challenge economies and central banks in maintaining price stability.
What shapes spillovers from monetary policy shocks in the United States to emerging market economies? (with P. McQuade, C. Schroeder, and M. Tirpák). European Central Bank Working Paper Series. No 2973, Aug. 2024. [Working paper version] [Slides] [Economic Bulletin box] - Revise & Resubmit at Journal of International Money and Finance.
Abstract
Monetary policy decisions by the Federal Reserve System in the US are widely recognised to have spillover effects on the rest of the world. In this paper, we focus on the asymmetric effects of US monetary policy shocks on macro-financial outcomes in emerging market economies (EMEs). We shed light on how domestic factors shape external monetary policy spillover effects using indicators on the macro-financial vulnerabilities and monetary policy stances of EMEs. We find that a surprise tightening of monetary policy in the US leads to an immediate tightening of financial conditions which leads to a decline in activity and prices in EMEs over one year. Importantly, these effects are amplified in periods of high vulnerabilities and attenuated when EMEs follow a prudent monetary policy stance. Our findings help explain the greater resilience of many EMEs to the Fed’s post-COVID-19 tightening cycle, and highlight the benefits of the broad improvements of monetary policy frameworks in these countries.
Using Newspapers for Textual Indicators: Guidance Based on Spanish- and Portuguese-Speaking Countries (with C. Ghirelli, L. Molina, J.J. Pérez, and E. Vidal). Computational Economics. Volume 62, Issue 2, Aug. 2023. [Published version] [Working paper version] [SUERF policy brief] [Code]
Abstract
This paper investigates the role that two key methodological choices play in the construction of dictionary-based indicators: the selection of local versus foreign newspapers, and the breadth of the press coverage (i.e. the amount of newspapers considered). The large literature in this field is almost silent about the robustness of research results to these two choices. These questions are relevant since the production of newspaper-based economic indicators is growing fast. We use as a case study the well-known economic policy uncertainty (EPU) index, taking as examples the six largest Latin American economies (Argentina, Brazil, Chile, Colombia, Mexico and Peru) and Spain. First, we develop EPU measures based on press with different levels of proximity, i.e. local versus foreign, and corroborate that they deliver broadly similar narratives. Second, we examine the macroeconomic effects of EPU shocks computed using these different sources by means of a structural Bayesian vector autoregression framework and find similar responses from the statistical point of view. These two applications should reassure researchers that they can rely on foreign sources to construct EPU indexes. This option may foster the comparability of results across countries and lay the groundwork for cross-country studies of uncertainty. Finally, we show that constructing EPU indexes based on only one newspaper, an option followed by many studies, may yield biased responses. Increasing the number of sources reduces the chances of obtaining biased responses. This suggests that it is important to maximize the breadth of the press coverage when building text-based indicators, since this would improve the robustness and credibility of results.
A BVAR toolkit to assess macrofinancial risks in Brazil and Mexico (with J.C. Berganza, R. Campos, and L. Molina). Latin American Journal of Central Banking. Volume 4, Issue 1, 100079, Mar. 2023. [Published version] [Working paper version] [Slides]
Abstract
This paper describes the set of Bayesian vector autoregression (BVAR) models that Banco de España uses to project GDP growth rates and to simulate macrofinancial risk scenarios for Brazil and Mexico. The toolkit consists of large benchmark models to produce baseline projections and various smaller satellite models to conduct risk scenarios. We showcase the use of this modeling framework with tailored empirical applications. Given the material importance of Brazil and Mexico to the Spanish economy and banking system, this toolkit contributes to the monitoring of Spain’s international risk exposure.
The Spanish economy and banking system’s exposure to material third countries (with J.C. Berganza, B. Lara, and E. Vidal). Banco de España Economic Bulletin. Issue Q2, Article 4, May 2023. [Published version]
How Economic Policy Uncertainty Spreads Across Borders: the Case of Latin America (with L. Molina, J.J. Pérez, and E. Vidal).
Abstract
Latin America's growth has been hindered by institutional instability and volatile economic policies, often driven by political cycles. These shifts generate uncertainty that deters investment and disrupts productivity. We analyze this phenomenon using Economic Policy Uncertainty (EPU) indices, assessing their impact on domestic macroeconomic variables, regional spillovers, and global transmission to key partners: the United States, China, and Spain. We construct new EPU indices for Bolivia, Ecuador, Paraguay, Uruguay, and Venezuela, and update existing ones for Argentina, Brazil, Chile, Colombia, Mexico, and Peru. Our results show that: (i) regional EPU shocks reduce GDP growth, capital inflows, and currency stability; (ii) Brazil and Mexico are key sources of uncertainty spillovers; and (iii) EPU shocks in Latin America affect financial and real variables in major partner economies, with Spain being particularly exposed.