Quantitative Easing in a Heterogeneous Monetary Union
I analyse the transmission of Quantitative Easing and assess its distributional effects in a heterogeneous monetary union. Focusing on European Monetary Union (EMU), I capture two types of heterogeneity: cross-country –- debt profiles (long-term debt liquidity, short-term to long-term debt, debt-to-GDP ratio) and within-country heterogeneity -- unequal households financial participation. I develop a Two-Country, Two-Agent New Keynesian model with a liquidity constraint, calibrated to EMU core and peripheral countries during the Global Financial Crisis. My main finding is that heterogeneity within a monetary union critically shapes the impact of Quantitative Easing. Across countries, differences in debt profiles shape the the aggregate response of output via the portfolio rebalancing channel. Bond liquidity governs the strength of the portfolio reallocation while short-to-long-term debt ratio drives the direction of these reallocations. Within countries, disparities in households’ access to financial markets condition both the aggregate output response and the distributional effects of QE.
Protectionism, Stability & Inequalities
On the (de)stabilization role of protectionism (with A.Venditti)*- Journal of Mathematical Economics, 2024, vol 113, pp 102993 Link to the paper
To what extent protectionism affects growth and (de)stabilizes the economies? Although the impact of protectionism on growth has been widely explored without reaching a consensus, few has been said on its impact on macroeconomic stability. The present paper attempts to gauge more precisely its implications using a Barro-type (Barro, 1990) endogenous growth model with public debt and credit constraint where tariffs are a proxy of protectionism. Our main result is to show that when the debt level is high, and the share of foreign goods in total consumption is large enough, increasing tariffs may have a destabilizing effect generating some expectation coordination failures between multiple equilibria. We also exhibit some trade-off between tariffs and growth as tariffs are beneficial only to the low growth equilibrium which may only appear when the international interest rate is low enough. Finally, focusing on the local stability property, we show that the high BGP is always characterized by local indeterminacy, while the low BGP is always a saddle point. We then prove that tariffs may be responsible for the existence of large self-fulfilling fluctuations
Heterogeneous exposure to tariffs
This paper studies the macroeconomic and distributional effects of retaliatory tariffs on U.S. goods imposed by thirteen emerging economies between 1996 and 2023. I construct a novel consumption-weighted tariff measure that captures the increase in the cost of the average consumption basket due to tariffs. Using Panel Local Projections combined with a Bartik-style shift-share instrument, I estimate the dynamic effects of tariff exposure on GDP growth, employment, income and wealth inequality. I document three main findings. First, retaliatory tariffs generate an immediate output contraction followed by a U-shaped recovery, consistent with a temporary negative supply shock. Second, unlike evidence for advanced economies, I find a short-run compression of income and wealth inequality, which potentially suggests that high-income and capital-owning households bear a larger share of the adjustment. Third, labor markets remain resilient, consistent with reallocation toward the informal sector. Overall, the results highlight the role of consumption structure in shaping the transmission and distributional consequences of protectionism in emerging economies.
Asymmetric Carbon Pricing in networked electricity - Joined with Cédric Crofils (Universitat de Barcelona)
We investigate the macroeconomic consequences of heterogeneous carbon pricing schemes in the U.S. electricity sector. Within a two-country DSGE-E framework featuring region-specific power generation technologies, incomplete factor mobility, and endogenous emissions, we assess how alternative policy design such as state-level carbon taxes, propagate through production costs, interregional electricity flows, and household welfare. The model enables us to quantify differential transmission channels across states and to analyse the extent to which carbon pricing may exacerbate or mitigate regional disparities.