Research

This paper proposes a new strategy for the identification of monetary policy shocks in SVARs. It combines traditional sign restrictions with external variable constraints on high-frequency monetary surprises and Federal Reserve internal forecasts. I employ it to evaluate the transmission of US monetary policy over the period 1965-2007. First, I find that contractionary monetary policy shocks unequivocally decrease output, sharpening the ambiguous implications of standard sign-restricted SVARs. Second, I show that the identified monetary policy shocks and monetary policy equations are consistent, respectively, with a narrative reading of the times and Taylor-type rules. Finally, I implement an algorithm for robust Bayesian inference in SVARs identified with external variable constraints, providing further evidence in support of this approach.

Presented at: Econometric Society European Meeting (ESEM) 2022, Econometric Society Australasia Meeting (ESAM) 2022, International Association for Applied Econometrics (IAAE) Annual Conference 2022, Scottish Economic Society (SES) Annual Conference 2022, Newcastle Economics Research and Development (NERD) Conference 2022, 4th QMUL Economics and Finance Workshop for PhD & Post-doctoral Students, 10th SIdE Workshop for PhD Students in Econometrics and Empirical Economics, Workshop in Empirical and Theoretical Macroeconomics at King's College London, 1st UEA Time Series Workshop.

Best Macroeconomics Paper Award at Newcastle Economics Research and Development (NERD) Conference 2022

We study the Structural Vector Autoregressions (SVARs) that impose internal and external restrictions to set-identify the Forecast Error Variance Decomposition (FEVD). We make the following contributions. First, we characterize the endpoints of the FEVD as the extreme eigenvalues of a symmetric reduced-form matrix. A consistent plug-in estimator naturally follows. Second, we use the perturbation theory to prove that the endpoints of the FEVD are differentiable with respect to the reduced-form parameters. Third, we rely on inference for eigenvalues to construct confidence intervals that are uniformly consistent in level and have asymptotic robust Bayesian credibility. A credit supply application illustrates our toolkit.

Presented at: Econometric Society North American Summer Meeting (NASM) 2024,  International Association for Applied Econometrics (IAAE) Annual Conference 2024, 2nd UEA Time Series Workshop, SNDE Annual Symposium 2024 , Annual Conference of the Scottish Economics Society 2024.

This paper studies the effects of government spending on US consumption inequality. We depart from previous literature on the distributional effects of fiscal policy and separately identify surprise and news shocks to government spending. In line with existing evidence and with the predictions of TANK models with Ricardian and non-Ricardian households, positive surprise shocks are found to decrease consumption inequality. On the contrary, we find that positive news shocks to government spending increase consumption inequality. We show that these findings can be explained by the response of the financial sector. The long-term interest rate rises after news of a future fiscal expansion and results in a drop in consumer credit. This prevents households at the bottom of the consumption distribution from financing their spending through credit, leading to larger consumption inequality. 

This paper evaluates how changes in inflation expectations affect US private consumption. First, we retrieve inflation expectations shocks by using structural vector autoregressions (SVARs) identified through bounds on the forecast error variance decomposition (FEVD). Compared to alternative identification schemes, our strategy requires milder restrictions on the contemporaneous relationship between inflation expectations and fundamental shocks. Second, we find that a positive inflation expectations shock is inflationary, contractionary, and lowers private consumption. This evidence is driven by a large decline in consumption of durables, while non-durable spending is only mildly affected. Our results show that this finding may be due to a negative income effect caused by the drop in expected real income.