Research

PUBLICATIONS

"Fiscal Limits and the Pricing of Eurobonds" (with J-P. Renne) — Management Science, Vol. 70, No. 2, 2024. [link]

This paper proposes a methodology to price bonds jointly issued by a group of countries — Eurobonds in the euro-area context. We consider two types of bonds: the first backed by several and joint guarantees (SJGs), the second featuring several but not joint guarantees (SNJGs). We estimate fiscal limits for the six largest euro-area economies over 2008–2021 and deduce counterfactual Eurobond prices. For the five-year maturity, SNJG bond yield spreads would have been about three times larger than SJG ones. Hence, issuing SJG bonds could result in gains at the aggregate level, though gains may temporarily vanish in periods of acute fiscal stress.

"Forward Guidance in Climate Policy" (with R. Degasperi, T. Hamadi, F. Natoli, V. Nispi Landi) — European Economic Review, Vol. 186, June 2026. [link]

By focusing on the European Emission Trading System (ETS), we identify a green transition shock when, on the days of key regulatory announcements, the price of carbon futures positively co-moves with the expected prices of energy transition metals. Positive shocks to the green transition lower industrial production in the short run but, differently from current climate regulation shocks, they decrease consumer prices by driving down fossil fuel prices. Results suggest producers and market participants react to positive transition shocks by shifting towards greener production inputs and investments, pointing to the effectiveness of forward guidance in climate policy to steer expectations and speed up the low-carbon transition.

WORKING PAPERS

"When the Treasury does Monetary Policy" (with H. Endo, M. Sfregola, L. Zanotti) — Bank of Italy Working Paper Series, forthcoming 2026. [link]

Debt management decisions have macroeconomic effects comparable to monetary policy. Using high-frequency movements in interest rate futures around U.S. Treasury issuance announcements, we identify a Treasury policy shock — an unanticipated change in public debt supply across maturities. A shock that raises the five-year Treasury yield transmits strongly to corporate borrowing rates, tightens credit conditions, and lowers industrial production significantly. These effects closely mirror those of a conventional monetary policy tightening. While long-term Treasury yields increase significantly, the shock has minimal effects on short-term interest rates. We show that this pattern reflects the Federal Reserve's sterilization of short-term Treasury issuance, while issuance at longer maturities is only partially offset.

"Macroeconomic Shocks and the Term Premium" (with L. Rossi, F. Venditti) — Bank of Italy Working Paper Series, No. 1520, 2026. [link]

We develop a new econometric model to identify the main macroeconomic drivers of the term premium on US ten-year government bonds, using daily data from the onset of the financial crisis through mid-2025. Macroeconomic uncertainty, the cost of hedging against inflation risk, and unexpected shocks to US domestic demand account for the bulk of daily variation in the US term premium. Uncertainty plays a crucial role as the only shock generating the recurring negative correlation between short-rate expectations and the term premium.

"The Economic Impact of European Capital Market Integration" (with F. Venditti, M. Caivano, P. Cova, M. Pisani) — Banca d'Italia Occasional Papers (QEF), No. 957, 2025. [link]

We identify two channels through which greater capital market integration in Europe affects macroeconomic variables: a price effect, arising from higher risk diversification opportunities, greater market liquidity, and the availability of a safe asset; and a quantity effect, stemming from the reduction of home bias in portfolio allocation. Based on model simulations and conservative assumptions, capital market integration could reduce the cost of capital by around 50 basis points — roughly 25 from lower risk and liquidity premia, and 25 from the availability of a European safe asset — stimulating additional investment worth about 1% of euro area GDP per year.

"Issuing European Safe Assets: How to Get the Most out of Eurobonds?" (with M. Pericoli, P. Tommasino) — Banca d'Italia Occasional Papers (QEF), No. 937, 2025. [link]

This study examines the market for euro-denominated bonds issued by the European Commission on behalf of the European Union. We find that the yields on currently outstanding Eurobonds exceed their theoretically appropriate levels — the yield on model-implied Eurobonds benefiting from joint guarantees is around 40 basis points lower than that on Eurobonds currently in circulation. There is therefore an untapped margin for reaping aggregate savings in terms of reduced interest expenditures. We suggest that this wedge is due to a combination of insufficient liquidity, an inconvenience premium, and uncertainty about future jointly guaranteed issuance.

"Fiscal Fatigue and Sovereign Credit Spreads" (with J-P. Renne) — SSRN Working Paper, 2024. [link]

We develop a dynamic sovereign credit risk model using the concept of fiscal fatigue, according to which stabilizing high debt levels requires unsustainably large surpluses, ultimately leading to credit risk. We define the fiscal limit as the debt level associated with a specific default probability at a given time. Exploiting information encoded in sovereign credit spreads, we estimate time-varying fiscal limits and fiscal spaces for four advanced economies from 2007 to 2022. Fiscal spaces correlate negatively with economic policy uncertainty and bond market volatility, but positively with central-bank balance sheet size.

"Economic Activity, Fiscal Space and Types of COVID-19 Containment Measures" (with A. Hosny) — IMF Working Papers, No. 2022/012. [link]

This paper argues that the type of COVID-19 containment measures affects the trade-offs between infection cases, economic activity, and sovereign risk. Using local projection methods and high-frequency daily data covering 44 advanced and emerging economies, we find that smart measures (e.g. testing) as opposed to physical measures (e.g. lockdowns) are best placed to tackle these trade-offs. Initial conditions also matter: containment measures are less disruptive when public health response time is fast and public debt is low.

"Fiscal Space and the Size of the Fiscal Multiplier" (with L. Metelli) — Bank of Italy Working Paper Series, No. 1293, 2020. [link]

This paper investigates the interaction between fiscal policy transmission and fiscal sustainability, captured through the concept of fiscal space. We propose four indicators to measure the evolution of fiscal space over time and estimate the effects of government spending shocks in the United States over 1929–2015. The main result is that the fiscal multiplier is above one when fiscal space is ample and below one when fiscal space is tight — a difference that is always statistically significant and robust across identification methods and samples.

WORK IN PROGRESS

"Safe Debt, Risky Debt: Sovereign Supply Shocks in the Euro Area" (with G. Floccari, L. Zanotti)

"The Financial Effects of Capital Market Integration in Europe" (with S. Arrigoni, A. Coletta, A. Glielmo, F. Venditti)

"The Effects of Government Spending on Credit: International Evidence" (with P. Alessandri, V. Ercolani)