Research

 Trade Fragmentation, Inflationary Pressures and Monetary Policy   (with Jenny Chan and Silvana Tenreyro)  Vol. 163, Oct 2026 - Journal of International Economics 

Abstract: How does trade fragmentation affect inflationary pressures? What is the response of monetary policy needed to sustain inflation at target? To answer these questions, we develop a heterogeneous agent, open-economy model featuring imperfect international risk-sharing. The model captures both the demand and supply side effects of fragmentation. It illustrates how the impact of fragmentation on inflationary pressures and the appropriate policy response depends not only on the direct effect of higher import prices on supply but, crucially, on how aggregate demand adjusts in response to lower real incomes and productivity stemming from fragmentation.

Coverage: Bracing for a More Inflationary World, by R. G. Rajan,  Between a Shock and a Hard Place: Trade Fragmentation and Monetary Policy − speech by Swati Dhingra, ECB Report of the IRC Workstream on Trade Fragmentation: Navigating a Fragmenting Global Trading System, ECB Monetary Policy Strategy Assessment 2025: A Strategic View on the Economic and Inflation Environment in the Euro Area, The Supply Side Demands More Attention − speech by Megan Green,Bank Underground: Trade fragmentation and inflationary pressures

Other versions: BIS Working Paper, Bank of England Staff Working Paper

Presented:  23rd BIS Annual Conference*, MMF joint workshop of the Macro and Finance Research Networks, 27th Annual DNB Research Conference*, 25th IWH-CIREQ-GW-BOKERI Macroeconometric Workshop: International Macroeconomics, ESSIM 2025*, SED 2025*,  5th Sailing the Macro Workshop, 2nd LBS Alumni Conference 

Productivity and Inflation Dynamics (with Jenny Chan and Silvana Tenreyro)

Abstract:  How does higher productivity affect inflation? Productivity shifts both supply and demand (through real incomes), and its effect on inflation depends on their relative magnitude and timing, as well as on the monetary policy response. We distinguish between a one-off level shock that temporarily increases productivity above trend and a persistent rise in productivity growth. A one-off, temporary increase in productivity lowers marginal costs and raises potential output, generating downward pressure on the price level. Once prices adjust however, inflation returns to target. By contrast, higher productivity growth raises expected permanent income and stimulates investment and consumption, increasing the natural real rate. Absent a tightening of monetary policy, inflationary pressures may emerge. Anticipation effects are central: if demand rises ahead of realised supply gains, inflation can increase despite higher productive capacity. In an open economy, the sectoral incidence of the shock also determines the impact on inflation. In summary, the inflationary consequences of productivity gains are a priori ambiguous and depend on the balance and timing of demand and supply responses, the composition of demand, and crucially, the monetary policy response. 

The Macroeconomics of International Remittance Flows (with Aditya Soenarjo) 

Online Appendix 

Funding: STICERD, Wheeler Institute for Business and Development

Abstract: This paper studies the role of international remittance flows in macroeconomic stabilization. We leverage novel transaction-level data from a global Money Transfer Operator to study how individuals send remittances in response to macroeconomic shocks. We document four empirical results. (1) Using a staggered difference-in-differences design, we find that remittance inflows increase by 31% in the week following a natural disaster, consistent with remittances acting as private insurance. (2) Across staggered COVID-19 lockdown reopenings, remittances increased 43% on average over the subsequent ten months, consistent with a labor market recovery. (3) Leveraging the 2021 U.S. stimulus checks as an exogenous income shock, we estimate that remittances rose by 20% in the two weeks following disbursement. (4) The exchange-rate elasticity of sender-currency flows is negative, reaching →0.20 at a twenty-week horizon, consistent with the income effect of exchange rate fluctuations dominating the substitution effect. We then develop a two-country heterogeneous-agent New Keynesian model featuring endogenous remittance flows. Two sufficient statistics — the intertemporal marginal propensity to consume (iMPC) and the intertemporal marginal propensity to remit (iMPR) — govern how income shocks propagate internationally through an international Keynesian cross, amplifying cross-country spillovers and generating co-movement absent in models without family linkages.

Presented:  LBS, 4th Sailing the Macro Workshop, Research Department Brown Bag Seminar at Boston Fed*

 The (Un)Intended Consequences of Trade Wars (JMP) [Draft coming soon!]

 Another Brick in the Wall: Education, House Prices and Segregation Dynamics in London (with Andrea Galeotti and Paolo Surico)

 *  Presentations by co-authors