Publications

• 1. "Assessing the Sources of Heterogeneity in Eurozone Response to Unconventional Monetary Policy". 

Applied Economics. Vol. 54 No. 48, pp 5549-5574, 2022. With H. Bennani and J-Y Gnabo. DOI: https://doi.org/10.1080/00036846.2022.2047600

[WP version]

Abstract:

In this paper, we aim at explaining a specific type of heterogeneity in the euro area pertaining to the diverging responses of countries and sectors to the European Central Bank’s Unconventional Monetary Policy. Equipped with stock markets indices of 17 sectors for each euro area country, we first perform an event-study analysis to assess the reaction of the markets. Next, we regress the responses on a set of country-specific drivers. Our main findings show that variables related to the nature of banking industry (e.g. cost-to-income, return on assets), macroeconomic environment (e.g. gross debt) and macroprudential policy all contribute to observe diverging responses to ECB’s monetary policies. While some sectors and countries responded more negatively than positively to the policies, the Unconventional Monetary Policy impacts the markets positively on average. A policy implication is that the heterogeneous response calls for domestic structural reforms that should target the discrepancies in the banking and the macroeconomic environments across euro area countries.

Keywords: Event-study; Ordered probit; Heterogeneity; Cross-sector/Cross-country; UMP

JEL classification: E52; E58; G14

Working papers

• 2. "Non-linear dynamics of inflation aversion in the Euro Area: Evidence from a Panel Smooth Transition model" 

Job Market Paper. 3rd R&R for publication at Economic Modelling. Preprint available at 10.2139/ssrn.4812069
[Replication code (DOI: 10.17632/bd2dr7k84j.1)]

Abstract:

This paper investigates how inflation and unemployment influence households’ inflation aversion. Existing literature documents significant cross-country heterogeneity in aversion, but offers no clear insights on the behavior of this aversion in a monetary union. The paper uses Eurobarometer survey data from 12 Euro Area countries and employs a Panel Smooth Transition Regression (PSTR) framework to examine this behavior. The first finding shows a significant regime-switching behavior: in below-average inflation countries, households exhibit strong aversion only in the high regime of inflation, whereas in above-average countries, the aversion exists in the low regime and intensifies in the high regime. Secondly, the response of aversion to inflation is heterogeneous: households from Austria, France, Germany, Finland, the Netherlands, Italy, and Belgium have an inelastic reaction. By contrast, households from Portugal, Luxembourg, Spain, Ireland, and Greece exhibit an elastic response. These findings broaden our understanding of households’ aversion for inflation in a monetary union.

Keywords: Inflation aversion; Panel Smooth Transition Regression PSTR; Euro Area; Heterogeneity

JEL classification: C23; E31; F45

Transition functions for inflation: high regime (above 0.5) and low regime of inflation

(EA12 average in bold blue)

• 1. "An estimation of a DSGE model with effective lower bound in the Euro Area"

[WP version]

Abstract:

This paper investigates the dynamics of the Euro Area business cycles under the ELB by estimating a non-linear DSGE model, and contrasting it with a model estimated with pre-crisis data and another without the ELB constraint. The analysis examines the responses of key macro variables to significant shocks, such as the NIRP, risk premiums, Government consumption, and interest rate shocks. The results from the non-linear model show that the Phillips Curve has flattened, with increased wage and price stickiness, that the ECB has shifted its policy focus toward output stabilization and strong response to inflation under the ELB. The non-linear model captures more persistent and volatile effects of the NIRP, risk premium, Government consumption, and interest rate shocks. These findings suggest that in the ELB environment, accommodative monetary policy, enhanced fiscal interventions, and structural reforms aimed at improving wage flexibility and financial stability are crucial for fighting economic downturns.

Keywords: DSGE; Bayesian estimation; Effective lower bound; Euro Area

JEL classification: C11; E32; E52

Works in progress

• 3. "Determinants of euro area citizens’ trust in the ECB"

• 2. "The populism - financial inequality - central bank independence nexus: A panel VAR approach"

• 1. "A network analysis of euro area stock markets interconnectedness and the transmission of the ECB's policies"