Research
Work in progress:
Uncertainty and the Business Cycle when Inflation is High, with E. Castelnuovo and G. Pellegrino. [In progress]
Abstract: We employ a nonlinear stochastic volatility-in-mean VAR framework to investigate the effects of macroeconomic uncertainty shocks on the business cycle. We document a larger positive inflation response and a bigger drop in real activity when inflation is high. We interpret our empirical findings with a nonlinear New Keynesian framework featuring second-moment shocks and trend inflation. The interaction between high trend inflation and firms’ upward pricing bias generates a large price dispersion that exacerbates the macroeconomic effects induced by the uncertainty shock. In our model, an aggressive monetary policy response to inflation in the presence of high trend inflation replicates the allocation implied by the model under a standard calibration of the policy rule when trend inflation is low.
Presentations:
Output Effects of Monetary Policy Shocks in Antolín-Díaz and Rubio-Ramírez (2018): Replication and Extension, with E. Castelnuovo and G. Pellegrino. [In progress]
Abstract: This paper elaborates on the well-known narrative sign restrictions identification strategy in vector autoregressive (VAR) investigations proposed by Antolín-Díaz and Rubio-Ramírez (2018, American Economic Review, 108(10): 2802–2829). We replicate their results in a narrow sense with their Matlab codes. In a wide sense, we focus on the case of the real effects of monetary policy shocks and investigate the joint employment of narrative and policy coefficient restrictions. The latter restrictions come from the Arias, Caldara, and Rubio-Ramírez (2019, Journal of Monetary Economics, 101, 1-13) paper, whose findings we also replicate. We show that adding policy coefficient restrictions to narrative restrictions importantly sharpens the identification of the output effects of monetary policy shocks.
