Working Papers
Friend, Not Foe? Monetary Policy and Energy Prices, with Alexander Kriwoluzky, Frederik Kurcz, and Ben Schumann
Abstract: In this paper, we first present a new empirical finding by showing that the European Central Bank’s monetary policy decisions significantly influence global energy prices. Through Lucas-critique-robust counterfactual analysis, we show that a central bank's ability to affect global energy prices strengthens the monetary transmission to inflation and alleviates the inflation-output tradeoff. We illustrate the relevance of these results by examining their role in the optimal policy response to an energy supply shock. Our estimates show that the ability of monetary policy to affect global energy prices halves the tightening necessary to stabilize inflation and mitigates the corresponding economic contraction.
Comparing the Efficacy and Efficiency of Fiscal Interventions, with Malte Rieth
(working paper available upon request)
Abstract: We study the efficacy and efficiency of alternative fiscal tools for macroeconomic stabilization in the euro area. We identify shocks to government consumption, government investment, income taxes, and consumption taxes in one model, using cross-sectional heteroskedasticity in a panel structural vector autoregression. All interventions are effective: expansionary shocks raise GDP significantly. Their efficiency is different: peak output multiplier is 1.6 for income taxes, 1.1 for government consumption, 0.7 for government investment, and 0.6 for consumption taxes. Exploiting these differences for policy design, we suggest budgetary neutral stimulus packages and efficient consolidations. We also investigate how these alternative fiscal tools transmit to the macroeconomy.
Collateral Policy Interventions and Financial Markets, with Pia Hüttl and Matthias Kaldorf
(working paper available upon request)
Abstract: This paper proposes a novel empirical approach to study the macroeconomic effects of Eurosystem collateral policy on financial markets. We identify collateral policy surprises using high-frequency (intraday) changes in bank stock prices around the Eurosystem collateral announcements. Expansionary collateral policy surprises increase overall stock returns and reduce volatility. They interact non-trivially with conventional monetary policy, as they increase expected short-term interest rates, and reduce market inflation expectations. Collateral policy surprises also compress government bond spreads, particularly for euro area periphery countries, suggesting that collateral policy affects the conduct of fiscal policy. We outline how our empirical findings can be reconciled in a DSGE model with financial frictions.
Work in Progress
Insulation through Credibility: Navigating U.S. Monetary Spillovers
(Job Market Paper)
Financial Market Reactions to U.S. Fiscal News: Evidence from a Novel Daily News Database, with Nikhil Patel
Monetary Policy Surprises in the Euro Area, with Michael Bauer