Research

Trade Shocks, Currency Unions and the Role of Fiscal Transfers

Abstract. A common trade shock can affect members of a currency union differently, while monetary policy cannot respond separately to country-specific conditions. This paper studies whether cross-country fiscal transfers can substitute for this missing adjustment margin. I develop a dynamic quantitative trade model with nominal rigidities and heterogeneous households and apply it to the 2025 U.S. tariff shock in the euro area. I introduce a cross-country fiscal transfer rule that operates as an automatic stabilizer, directing resources toward countries more adversely affected by the shock. A transfer scheme with a present discounted value of about 0.5% of euro-area GDP offsets all the additional sectoral labor-market distortions and consumption dispersion generated by the loss of country-specific monetary policy, while reducing by about half the additional dispersion in employment and GDP. Thus, relatively small cross-country transfers can substitute for much of the stabilization role of country-specific monetary policy. Finally, I show that euro-area retaliation combined with fiscal transfers would have further mitigated the labor-market effects of the U.S. tariff shock.

[Working Paper]  [Summary Slides]

Committee: Natalia Ramondo, Masao Fukui, Joaquin Blaum, and David Lagakos.

Working Paper

The welfare implications of the China Shock across US States and Skill Groups 

Abstract. I build a dynamic quantitative spatial trade model with firm and worker heterogeneity, mobility frictions, and short-run unemployment to quantify the regional and distributional effects of the China Shock across U.S. states. The baseline model implies an average welfare gain (0.1%) but substantial heterogeneity across skill groups. Average welfare gains are 0.01% for unskilled workers —who lose in 17 of 50 states—versus 0.31% for skilled workers, who lose in only 7 states. The model predicts an average increase of 0.78% in the skill premium, with more exposed states experiencing larger increases. Finally, I find long-run gains in every state for both types of workers. 

[SSRN Working Paper]

Mind the app: do European deposits react to digitalisation? , with Nadya Wildmann , Beatrice Scheubel , Livio Stracca , Francesco Asvisio and Luisa Fascione . 

Abstract. The March 2023 banking turmoil has intensified discussions whether social media and the digitalisation of finance have become significant factors in driving severe deposit outflows. We introduce the concept of deposits-at-risk and utilize quantile regressions for disentangling determinants of stressed outflows at the lowest tail of the distribution. For a sample of large banks directly supervised by the ECB, our findings indicate that an increased use of online banking services leads to a small amplification of extreme deposit outflows, but this effect is not further exacerbated by the availability of a mobile banking app. Online banking use and availability of a mobile app do not have a causal effect on deposit volatility in normal times. Finally, social media are impactful only in idiosyncratic cases. 

[ECB Working Paper]

Technology Diffusion at the Top, Firm-to-Firm Technology Transfers and the Welfare Gains from Openness. Second Year Paper, Boston University, 2023.

Abstract. I develop a static model to study the macroeconomic effect of multinational production (MP) and trade in the context of technology diffusion among the best firms in the sector and simultaneous firm-to-firm technology transfers between sectors. I show the importance of separately calibrating aggregate spillovers and firm-to-firm technology transfers in the buyer-supplier linkages. I focus my analysis on non-tradable suppliers, and show how different levels of technology transfer affect the gains from openness.

[Working Paper]

Work in progress