Abstract: We analyse the pass-through of exchange rates to prices in small, open, commodity-exporting economies, taking Canada as a case study. We estimate pass-through on a wide cross-section of disaggregated import, producer, and consumer prices, conditional on commodity shocks that explain a major share of the volatility in prices and exchange rates. Our pass-through measure is free from endogeneity concerns between prices and exchange rates and leads, in some cases, to opposite inference in reference to the sign of the passt-through compared with standard estimates. By focusing on industry-level producer price indexes, we show that conditional pass-through decreases with industry market power, while it increases with the degree of import penetration and the persistence of industry-specific shocks. 

Presentations: North American Summer Meeting of the Econometric Society 2021, Montreal (UQAM); 11th RCEA Money-Macro-Finance Conference (RCEA, Milano-Bicocca, California Riverside, European Commission); and CEBRA Workshop for Commodities and Macroeconomics (FED Board).

Abstract: We set up a New Keynesian model for a small open economy with dominant currency pricing, to study the response of domestic inflation to an increase in the US interest rate. We show that the sign of the inflation response crucially depends on the monetary policy regime: after a US monetary tightening, inflation decreases in countries with an exchange rate peg; it increases in countries with a flexible exchange rate, unless the country follows a strict inflation targeting: in this latter case, inflation barely moves. These results are consistent with empirical evidence in a sample of emerging economies, using local projection methods. 

Presentations: Bank of Italy seminar series; Bocconi University seminar series; and 11th RCEA Money-Macro-Finance Conference (RCEA, Milano-Bicocca, California Riverside, European Commission); CEPR International Macroeconomics and Finance (IMF) Annual Meeting; Banque de France "Global Monetary Policy Spillovers" (featuring a special issue for the Journal of International Money and Finance).

Abstract: This paper studies the weaknesses of the German manufacturing sector in recent years. Three factors weigh more heavily there than in the rest of the euro area. First, higher gas prices penalized German energy-intensive manufacturing firms more than those of other countries, owing to the German chemical sector’s greater reliance on gas and strong interconnections with other energy-demanding industries. Second, the impact of weak global demand was stronger in Germany due to its higher trade openness. Third, the automotive sector – which has suffered a lacklustre demand since 2018, also as a result of the uncertainties surrounding the transition to electric vehicles and of the increasing competition from Chinese car manufacturers – is twice as relevant for manufacturing in Germany than for the euro area as a whole. An econometric analysis shows large spillovers from the German industry to the manufacturing sectors of other euro-area economies. All three of these root causes of German manufacturing weakness could have long-lasting effects if they remain unaddressed. 

Abstract: The COVID-19 epidemic affected the ability of traditional forecasting models to produce reliable scenarios for the evolution of economic activity. We combine macroeconomic variables with epidemiological indicators to account for the COVID-19 shock and predict the short-term evolution of Italian GDP growth. In particular, we use a mixed-frequency dynamic factor model together with a sophisticated susceptible-infectious-recovered epidemic model featuring endogenous policy responses. First, we simulate different scenarios of economic growth depending on the course of the pandemic in Italy. Second, we evaluate the forecast performance of the model for the period August 2020-March 2021. We find that taking epidemiological indicators into consideration is important for obtaining reliable projections. 

Abstract: In this paper we analyze the impact of shocks to global risk aversion on the term structure of sovereign spreads between emerging market economies (EMEs) and the US economy. Focusing on the difference between long- and short-term spreads (i.e. the term premium gap), we find that an increase in global risk aversion reduces the term premium gap. This finding is consistent with the evidence that during crises EMEs experience a higher risk of default with respect to safe advanced economies, and more strongly so at shorter maturities.

Presentations: Bank of Italy, Bocconi University, Annual Conference of the International Association for Applied Econometrics (IAAE 2024), and 11th PhD Student Conference on International Macroeconomics (Université Paris Nanterre), 2024 Annual Meeting of the Central Bank Research Association (CEBRA).

Abstract: This study analyzes how households’ inflation and consumption expectations respond to information about inflation at different stages of its cycle. The analysis employs a survey of Italian households, in which a randomly selected subset is provided with information regarding past inflation. When inflation is rising, providing households with information raises their inflation expectations, as they have not yet fully accounted for its recent increase. Conversely, when inflation is declining, the provision of information to households results in a reduction in their inflation expectations, as these households have already discounted its recent fall; the other households remain anchored to past high levels. Exposure to inflation data exerts significant influence also on consumption expectations. Knowledge about high past levels discourages spending, while knowledge of low inflation encourages it, particularly among less affluent households. These results are consistent with households’ interpretation of inflation dynamics through a supply-side lens, especially when they are driven by energy prices. 

Presentations: Macro-Monetary workshop Bank of Italy - EIEF; Brucchi-Luchino workshop; BSE Summer Forum - Theoretical and Experimental Macroeconomics Workshop; Annual Conferences of the International Association for Applied Econometrics (IAAE) 2025. 

Abstract: We assess the impact on the Italian industrial sector of the abrupt increase in energy prices and of shortages in the supply of inputs since the early months of 2021, focusing on production and producer prices and conducting a disaggregated analysis. Producer prices in energy- and non-energy-intensive industries had already exhibited different dynamics at the beginning of 2021. The same pattern characterized industrial production only after the spring of 2022. These developments are consistent with the result of firms’ responses to bottlenecks and energy supply shocks, as shown by the Bank of Italy’s Business Outlook Survey of Industrial and Service Firms in the second-half of 2022. The majority of firms, which have been affected by higher energy costs or supply bottlenecks, reported having increased their selling prices. Some firms also reduced profit margins and implemented energy-saving measures. Only a small share of firms reported having reduced or discontinued production.