Mishel Ghassibe

• Since 2022, I am a tenure-track Junior Researcher (Assistant Professor) at CREi and Affiliated Professor at Barcelona School of Economics (BSE)

• My research interests are in macroeconomics, with a particular focus on implications of production networks, firm heterogeneity and goods market frictions for monetary and fiscal policies

• I am an academic consultant at the European Central Bank and an academic visitor at the Bank of England, having previously served as a chief expert at the National Bank of Ukraine

• Above all, I am a proud Ukrainian, and was born and raised in the city of Vinnytsia

My CV can be found here. 

I can be contacted at: mghassibe (at) crei.cat.

Publications

"State Dependence of Fiscal Multipliers: the Source of Fluctuations Matters" (with F. Zanetti) [final manuscript] [JME]

Journal of Monetary Economics, (2022, Vol. 132, pp. 1-23) [lead article]

Winner of the 2023 Journal of Monetary Economics Best Paper Award

Coverage: Economics Observatory. 

We develop a general theory of state-dependent fiscal multipliers in a framework featuring two empirically relevant frictions: idle capacity and unsatisfied demand. Our key novel finding is that the source of fluctuations determines the cyclicality of multipliers. Policies that stimulate demand, such as government spending, have multipliers that are large in demand-driven recessions, but small and possibly negative in supply-driven downturns. Conversely, policies that boost supply, such as cuts in payroll taxes, are ineffective in demand-driven recessions, but powerful if the downturn is supply-driven. Austerity, implemented by a reduction in government consumption, can be the policy with the largest multiplier in supply-side recessions and demand-driven booms, provided elasticities of labor demand and supply are sufficiently low. We obtain model-free empirical support for our predictions by developing a novel econometric specification that allows to estimate spending and tax multipliers in recessions and expansions, conditional on those being either demand- or supply-driven.

"Monetary Policy and Production Networks: an Empirical Investigation" [final manuscript] [JME]

Journal of Monetary Economics  (2021, Vol. 119, pp. 21-39)

Winner of the 2020 European Economic Association Young Economist Award

Winner of the Poster Session at the 2018 ECB Sintra Forum on Central Banking

This paper offers novel econometric evidence on the contribution of production networks to the effect of monetary shocks on real macroeconomic variables. In particular, we construct a highly disaggregated monthly dataset on US final sectoral consumption to estimate that at least 30% of the effect of monetary shocks on aggregate consumption comes from amplification through input-output linkages, which facilitate downstream propagation of price rigidity. At the sectoral level, we find that the network effect rises in the frequency of price non-adjustment and intermediates intensity. Moreover, the network effect is highly concentrated: sectors that jointly account for 17% of our sample aggregate consumption account for 98% of the amplification. In order to develop our econometric specification, we obtain novel analytical sector-level solutions to a forward-looking New Keynesian model with asymmetric input-output linkages.

Working Papers

"Endogenous Production Networks and Non-Linear Monetary Transmission" [draft]

revise &  resubmit,  American Economic Review 

Winner of the Best Paper Prize at the 2022 European Winter Meeting of the Econometric Society

I develop a tractable sticky-price model, where input-output linkages are formed endogenously. The model delivers cyclical properties of networks that are consistent with those I estimate using sectoral and firm-level data, conditional on identified real and nominal shocks. A novel source of state dependence in nominal rigidities arises: the strength of complementarities in price setting and monetary non-neutrality increase in the number of suppliers optimally chosen by firms. As a result, the model simultaneously rationalizes the following observed non-linearities in monetary transmission. First, the model produces cycle dependence: the magnitude of real GDP’s response to a monetary shock is procyclical. This occurs because in expansions the level of productivity is high, encouraging cost-minimizing firms to connect to more suppliers, which makes pricing decisions more co-ordinated and monetary non-neutrality stronger. Second, there is path dependence: non-neutrality of real GDP is higher following previous periods of loose monetary policy. This happens as under nominal rigidities higher supply of money makes prices charged by suppliers cheap relative to the cost of in-house labor, encouraging more connections and strengthening pricing complementarities. Third, there is size dependence: larger monetary expansions make the network denser and have a disproportionally larger effect on GDP than smaller expansions. On the other hand, larger monetary contractions shrink the network and generate a disproportionally smaller decrease in GDP. Such size dependence holds even if the probability of price adjustment is state-independent.

"Business Cycles with Pricing Cascades" (with A. Nakov) [draft]

Business cycles often feature large shocks to specific sectors, accompanied by strong inflationary swings led by the growing fraction of pricing-adjusting firms. Rationalizing such phenomena requires enhancing our modeling toolkit. We do that by building a novel non-linear dynamic general equilibrium framework containing a disaggregated production economy with networks and optimal decisions on the timing and size of price adjustments. The interaction of our model ingredients creates equilibrium cascades: large movements in aggregates trigger additional price adjustment decisions on the extensive margin. Crucially, networks may dampen or amplify cascades, depending on the type of shock driving the business cycle. When faced with large demand shocks, such as monetary interventions, networks dampen cascades, thus slowing down price adjustment decisions and giving central banks substantial power to stimulate the real economy with limited inflationary consequences. In contrast, under aggregate or sector-specific supply shocks, networks amplify cascades, leading to fast increases in the frequency of repricing and large inflationary swings. Applied to Euro Area data, we show that it is the novel interaction of networks with pricing cascades that allows us to quantitatively match the surges in inflation and the repricing frequency in the post-Covid era.

"Intertemporal Pass-Through" (with B. Wanengkirtyo and I. Yotzov) [draft]

Forward-looking pricing is at the core of modern macroeconomics, yet a gap remains between its theoretical foundations and their empirical validation. To bridge this gap, we study intertemporal pass-through (iPT): the sensitivity of firms’ desired prices to changes in their expected future marginal costs, a micro building block of foresight in aggregate inflation. On the empirical side, we obtain direct iPT estimates by combining UK firm-level survey data with idiosyncratic news shocks from a natural experiment: the March 2019 announcement of a future tariff schedule in the event of a ‘No-Deal’ Brexit. We find iPT to be largest among firms with the lowest frequency of price adjustment and those expecting the cost shock to arrive earlier. In addition, iPT is smaller among firms with state-dependent pricing and for larger shocks. On the theory side, we derive iPT in a model with heterogeneous adjustment frequencies and perceived shock horizons, formally reconciling our empirical findings on the drivers of iPT differences. We also use our setup to assess the general equilibrium consequences of iPT heterogeneity. In particular, we show that the sensitivity of aggregate inflation to changes in future costs is convex in non-adjustment frequencies and perceived shock horizons. As a result, iPT heterogeneity amplifies the degree of forward-lookingness of macroeconomic aggregates. Thus, announcements of future policies have contemporaneous effects, and heterogeneity in pricing decisions increase their magnitude.

Work in Progress

"A Disaggregated Economy with Optimal Pricing Decisions" (with A. Ferrari) 

Awarded the 2023 Lamfalussy Research Fellowship (ECB)

"Keynesian Micromanagement" (with F. Zanetti) 

Policy Work

"SME Financial Inclusion for Sustained Growth in the Middle East and Central Asia" (with M. Appendino and S. Elsadek Mahmoudi)

IMF Working Paper  No. 19/209