Working Papers
Presented at: CEPR Paris Symposium 2025, Econometric Society European Winter Meeting 2025 (Nicosia, scheduled), VfS Annual Conference 2025 (Cologne), CEBRA Annual Meeting 2025 (Boston), International Monetary Fund research seminar and other seminars.
Insulation through Credibility: Navigating U.S. Monetary Spillovers
(Job Market Paper)
Abstract: U.S. monetary policy has large effects on global business cycles and financial conditions, and its spillovers pose a key challenge for central banks around the world. I study how a central bank’s inflation-targeting credibility shapes the domestic economy’s exposure to U.S. monetary spillovers and the resulting policy trade-offs. Using a high-frequency event study framework, I provide novel evidence that in economies with weaker credibility, short-term inflation and interest-rate expectations increase more strongly, and long-term inflation expectations are revised upward following a U.S. monetary tightening. To rationalize these findings and assess their macroeconomic implications, I develop an open-economy New Keynesian model with imperfectly anchored long-term inflation expectations. Private agents are uncertain about the long-run inflation anchor and update their beliefs about long-run inflation using an adaptive learning rule. When credibility is weak, agents’ beliefs become more sensitive to realized inflation. Consequently, a foreign monetary shock that has only modest effects on the domestic economy under strong credibility can generate persistent inflation and large output losses when credibility is weak. This amplification leads to a more severe inflation–output trade-off for domestic policymakers. Evidence from Bayesian vector autoregressions comparing economies with differing degrees of inflation-targeting credibility supports the model’s prediction that the severity of the policy trade-off depends on credibility.
Presented at: Kiel-CEPR Monetary Policy Conference 2025 (Berlin), Applied Macroeconomics in a Changing World (Oslo, 2025), EEA Annual Congress 2023 (Barcelona), Oslo Macro Conference 2023, the European Central Bank and other seminars. Previously circulated as The Energy-Price Channel of (European) Monetary Policy.
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.
Presented at: Scottish Economic Society Annual Conference 2024 (Glasgow), IAAE Annual Conference 2023 (Oslo), EEA Annual Congress 2023 (Barcelona), VfS Annual Conference 2023 (Regensburg), Society for Computational Economics Annual Conference 2023 (Nice), University of Bonn and other seminars.
Macroeconomic Effects of Tax and Spending Policies in the European Monetary Union, with Malte Rieth
Abstract: Fiscal policy packages typically comprise multiple instruments, including different spending components and forms of taxation. We move beyond aggregate measures to analyze how these specific instruments differ in their ability to stabilize the macroeconomy. 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 for euro area economies. We find that all fiscal interventions are effective: expansionary shocks raise GDP significantly. However, their efficiency is different: peak output multipliers are around 1.3 for both government consumption and government investment, 0.4 for income taxes, and 0.3 for consumption taxes. Using the identified fiscal shocks, we empirically trace the dynamic effects of each fiscal instrument on key macroeconomic variables. Our estimates show that increases in government consumption and investment raise inflation, while cuts in income and consumption taxes reduce it. We also find that the nominal policy rate remains unchanged—consistent with a common monetary policy unresponsive to national fiscal shocks—so these opposite inflation responses translate into diverging real interest rate paths, providing a mechanism that helps explain the documented differences in efficiency across fiscal instruments.
Presented at: IAAE Annual Conference 2025 (Turin), ifo Workshop on Macroeconomics and International Finance 2025, Bundesbank research seminar, Banca d'Italia research seminar and other seminars.
Collateral Policy Interventions and Financial Markets, with Pia Hüttl and Matthias Kaldorf
Abstract: Central bank collateral policy specifies which assets banks can pledge as collateral to obtain central bank funding. To study the systematic effects of central bank collateral policy on banks, financial markets, and asset prices, we propose a high-frequency approach to identify collateral policy surprises, using bank stock price changes around Eurosystem collateral policy announcements. Expansionary collateral policy surprises are associated with excess returns of bank stocks, a decline in several common volatility measures, and a decrease in bank CDS spreads. They also compress core-periphery government bond spreads, even for policy changes that are unrelated to the collateral treatment of government bonds. These findings indicate that collateral policy influences sovereign bond markets through an uneven transmission channel distinct from both asset purchases and conventional monetary policy. Lastly, we present a stylized intermediary asset pricing model that rationalizes our empirical findings on how collateral policy transmits to banks and sovereign bond markets.
Work in Progress
Presented at: University of Warsaw-DIW "Text Mining and Machine Learning in Macroeconomics and Finance" Workshop (Warsaw, 2025), International Monetary Fund research seminar and other seminars.
Financial Market Reactions to U.S. Fiscal News: Evidence from a Novel Daily News Database, with Nikhil Patel
(working paper available upon request)
Abstract: We construct a novel daily-frequency fiscal news database for the United States from a historical archive of news feeds that closely represent financial market participants’ real-time information set. Leveraging the archive’s granular coverage, we recover a fiscal policy surprise series to study how fiscal news transmits to the macro-financial environment. We find that expansionary fiscal news significantly increases long-term Treasury yields and term premia. These movements coincide with upward revisions in market-based inflation expectations and risk premia at both short and long horizons. We further assess the role of systematic monetary policy in shaping fiscal transmission to financial markets. Employing Lucas critique–robust empirical counterfactuals, we show that the monetary policy reaction to fiscal news is central in shaping the responses of stock prices, the U.S. dollar, and near-term inflation expectations. Finally, we document substantial spillovers of U.S. fiscal policy to international sovereign bond and equity markets.
Presented at: "Fiscal Policy, Debt and Inequality" Conference (Berlin, scheduled), De Nederlandsche Bank research seminar.
Beyond Multipliers: Distributional Income Effects of Government Spending in the Euro Area, with Alexander Kriwoluzky, Melina Ludolph, Madalina Patru, and Lena Tonzer
Monetary Policy Surprises in the Euro Area, with Michael Bauer