RESEARCH INTERESTS
Macroeconomics. Theoretical and Empirical Analysis on:
Business Cycle with Endogenous Firm Dynamics and Heterogeneity
Models with Non-linearities, Asymmetries and Uncertainty.
Models with Firms Heterogeneity and Structural Changes.
Models with Financial and Labour Market Frictions.
Optimal Monetary and Fiscal Policy,
Estimation of DSGE models, and SVAR analysis.
NEW Working Papers ⚡⚡
Abstract
We study the macroeconomic effects of green technology news shocks using novel UK patent data. We construct novel instruments based on published and granted patents, distinguishing green from total innovation. We find that signals from published green patents (still pending and not yet granted) reflect greater uncertainty and imply recessionary effects and a decline in productivity, whereas news on green innovations based on granted patents raise productivity and output overtime. Over time, sector-level responses confirm these asymmetries, highlighting how the timing and viability of green innovation shape economic outcomes. A DSGE model with endogenous uncertainty and an option to delay investment and hiring explains the differential effects of green news shocks based on published versus granted patents.
Belief Distortions and Uncertainty about Inflation, with S. Fasani, G. Pagano-Giorgianni and V. Patella ⚡💥
Abstract
This paper studies the macroeconomic effects of a belief distortion shock—defined as the unexpected component of household inflation expectations after accounting for professional forecasts and observable fundamentals. Using survey data, U.S. macroeconomic variables, and machine-learning methods, we identify this shock and examine its effects both within and outside the zero lower bound (ZLB), conditioning on household inflation uncertainty. The shock raises inflation, uncertainty, and unemployment in normal times. At the ZLB, the shock reduces real interest rates and becomes expansionary; however, the accompanying rise in inflation uncertainty dampens or can even reverse these effects. A New Keynesian model with belief shocks replicates these dynamics and matches the empirical patterns of inflation uncertainty.
NEW Published Paper
Endogenous Uncertainty and the Macroeconomic Impact of Shocks to Inflation Expectations
with Guido Ascari, Stefano Fasani and, Jakob Grazzini
NEW PAPER: November 2022
Video presentation, Inflation: Drivers and Dynamics Conference 2022, Cleveland FED
The Journal of Monetary Economics, vol. 140, 48-63
Selected Publications
Endogenous Uncertainty and the Macroeconomic Impact of Shocks to Inflation Expectations. (2023), with Ascari G. Fasani F. and Grazzini J. the Journal of Monetary Economics, vol. 140, 48-63.
Monetary Policy Uncertainty and Firm Dynamics, with Stefano Fasani and Haaron Mumtaz, (2022), Review of Economic Dynamics, vol. 47, pp 278-296.
A Money-Financed Fiscal Stimulus: Redistribution and Social Welfare Chiara, P., Rossi, (2023) In: Journal of Money Credit and Banking, vol. 55, 595-617
Firm Ex-ante Heterogeneity, Entry, and the Labour Share, with Jakob Grazzini, (2023), The Economic Journal, vol. 133, 235–257
Asymmetries in Monetary Policy, with Benigno, P., Rossi, L. 30/11/2021 In: European Economic Review. 140. Former CEPR Working paper DP15944
The Overshooting of Firms' Destruction, Banks and Productivity Shocks, European Economic Review, (2019), vol. 113, pp. 136-155.
Fasani Stefano and Lorenza Rossi. (2018). Are Uncertainty Shocks Aggregate Demand Shocks? Economics Letters, vol. 167, pp. 142-146.
La Croce Carla and Lorenza Rossi. (2018). Firms Endogenous Entry and Monopolistic Banking in a DSGE model, (2018), Macroeconomic Dynamics, vol. 22(1), pp. 153-171.
Ascari, G., A. Colciago and L. Rossi, (2017). Limited Asset Market Participation, Sticky Wages and Monetary Policy, Economic Inquiry, vol. 55(2), pp. 878-897.
Etro, F. and L. Rossi, (2015). New-Keynesian Phillips Curve with Bertrand Competition and Endogenous Entry,” Journal of Economic Dynamics and Control, 51: 318-340.
Faia, E. and L. Rossi, (2013). Unions Power, Collective Bargaining and Optimal Monetary Policy,” Economic Inquiry, 51(1): 408-427.
Ascari, G. and L. Rossi, (2012). Trend Inflation and Firms Price-Setting: Rotemberg vs. Calvo,” The Economic Journal, 122(563): 115-1141.
Mattesini, F. and L. Rossi, (2011). Monetary Policy and Automatic Stabilizers, the Role of Progressive Taxation, Journal of Money, Credit and Banking, 44(5): 825-862, 2011.
Calvo vs. Rotemberg in a Trend Ináation World: An Empirical Investigation, (2011), Journal of Economic Dynamics and Control, vol. 35, pp. 1852ñ1867, with G. Ascari and E. Castelnuovo.
Optimal Monetary Policy in Economies with Dual Labor Markets, (2009), Journal of Economic Dynamics and Control, vol. 33, 1469-14, with F. Mattesini.
Further Publications
Are Uncertainty Shock Aggregate Demand Shocks? (2018). Economics Letters, Vol. 167, pp. 142-146, with Stefano Fasani. 8.
Firms Endogenous Entry and Monopolistic Banking in a DSGE model (2018), Macroeconomic Dynamics, Vol 22, pp. 153-171, with Carla La Croce.
Limited Asset Market Participation, Sticky Wages and Monetary Policy, (2017), Economic Inquiry, vol. 75, pp. 879-897, with Guido Ascari and Andrea Colciago.
New-Keynesian Phillips Curve with Bertrand Competition and Endogenous Entry, (2015), Journal of Economic Dynamics and Control, vol. 51, pp. 318-340, with F. Etro.
Determinacy analysis in high order dynamic systems: the case of nominal rigidities and limited asset market participation, (2017). Economics Letters, Vol.159, pp. 82-87, with Guido Ascari and Andrea Colciago.
Policy Games, Distributional Conáicts and the Optimal Inflation, (2015), Macroeconomic Dynamics, vol. 19(6), 12 61-1293, with A. Albonico.
Firms Dynamics, Endogenous markups and the Labor Share of Income, (2015), Macroeconomic Dynamics, vol. 19(6) 1309-1331, with A. Colciago.
Taylor Rules, Long-Run Growth and Real Uncertainty, (2015), Economics Letters, vol. 133, pp. 31-34, with B. Annicchiarico.
Endogenous Growth, Monetary Shocks and Nominal Rigidities, (2011), Economics Letters, vol. 113(2), pp. 103-107, with B. Annicchiarico and A. Pelloni.
Real Wage Rigidities and Disináation Dynamics: Calvo vs. Rotemberg Pricing, (2011), Economics Letters, vol. 110, pp. 126-131, with G. Ascari.
Firms' Dynamics and Business Cycle: New Disaggregated Data (2021), Journal of Macroeconomics. Volume 69, September 2021
Optimal Monetary Policy under Calvo Pricing with Bertrand Competition (2015), Journal of Macroeconomics, vol. 45, pp. 423-440, with F. Etro.
Inflation bias and markup shocks in a LAMP model with strategic interaction of monetary and Fiscal policy, (2017), Journal of Macroeconomics, vol. 52, pp. 39-55, with Alice Albonico.
Optimal Monetary Policy in a New Keynesian Model with Endogenous Growth, (2013), Journal of Macroeconomics, vol. 18(B), pp. 274- 285, with B. Annicchiarico.
Monetary Policy, Rule-of Thumb Consumers and External Habits: An G7 Comparison, (2010), Applied Economics, pp. 1-18, with Di Bartolomeo G. and Tancioni M.
Productivity Shocks and Optimal Monetary Policy in a Unionized Labor Market Economy, (2008), The Manchester School, vol. 76(5), pp.578-611, with F. Mattesini.
Effectiveness of Monetary Policy and Limited Asset Market Participation, (2007), International Journal of Economic Theory, vol. 3, pp. 213-218. With Di Bartolomeo G.
Heterogeneous Consumers, Demand Regimes, Monetary Policy E¢ cacy and Determinacy, (2007), Rivista di Politica Economica, pp. 111- 141. With Di Bartolomeo G.
Voce in Dizionario Economico. Dinamica Economica. In: Fiorella Kostoris. Economia e Finanza . ROMA: Istituto della Enciclopedia Italiana, Treccani, ISBN: 9788812001293
Voce in Dizionario Economico. Overshooting. In: Fiorella Kostoris. Economia e Finanza. ROMA: Istituto della Enciclopedia Italiana, Treccani, ISBN: 9788812001293