New

The effect of structural reforms on growth in Europe and Central Asia is assessed by looking separately at each supply-side channel: capital, labor, and productivity, with the last estimated using the stochastic frontier approach. By controlling for the interaction with the economic cycle, the paper also investigates whether timing matters. Improvements in human capital, regulatory quality, and government effectiveness have the most impact on potential growth, along with financial development. European Union accession may also boost growth, mainly by encouraging capital deepening. However, changes in labor market regulation and tariffs may have ambiguous effects. Applying the results to Serbia, the analysis demonstrates that closing certain structural gaps with the frontier would help boost its potential.

Working papers

Available as CASMEF Working Paper, 2017

I investigate the relation between market structure and Secular Stagnation, from a theoretical and an empirical standpoint. By means of a 3-periods OLG model, I show that an increase in market power triggers a decline in the natural interest rate and employment. The model rationalizes the contemporaneous decline of the employment rate, the input shares, and the equilibrium interest rate. The estimation of a structural VAR with long-run restrictions confirms the above results.

Bubbles exist when agents are financially constrained, and they raise both welfare and the equilibrium interest rate. However, the perfect foresight equilibrium dynamics is not stationary when prices are flexible. After a deleveraging shock, the economy eventually reaches the bubbleless steady state, where Secular Stagnation may arise. If nominal rigidities bind, instead, monetary policy can ensure the stability of the bubbly steady state, and the stationarity of dynamics around it by adopting an accommodative stance.

CASMEF Working Paper 2017/09

Disentangling the direct causal effect that sanctions exert on bank performance from the indirect through default risk, we show that a trade-off exists for regulators between banks’ performance and stability in Italy. Two key findings provide evidence for the non-triviality of the return-risk nexus: (i) banks’ liquidations are concentrated at the lower-end of the profitability distribution, resulting in (attrition) biased estimates; (ii) the drop-out is informative since it depends on the unobserved measurements of profitability. Despite this evidence, while returns are affected by sanctions and regulatory requirements, default risk is not. However, looking at growth of gross loans, enforcement actions reduce default risk though at a cost of a significant fall in lending, creating a regulatory trade-off. In fact, through loans’ growth, we account for the key dynamics of intermediaries’ soundness, namely higher profits and less non-performing loans. 

CASMEF Working Paper, 2018

By means of a Global VAR, I study the international determinants of open-end equity mutual funds with domestic focus for Canada, Japan, and US. I focus on the generalized impulse response functions to domestic and foreign shocks in the short-term interest rate and to a shock in the capital-to-asset ratio of US banks. I show that mutual funds play an important role for the transmission of domestic and foreign shocks besides the standard New-Keynesian macroeconomic variables. I find that an unexpected shock in the US bank capital-to-asset ratio may have expansionary effects with spillovers to the foreign economies, and zero or negative impact on mutual fund markets.

Publications

Economics of Transition and Institutional Change, January 2024

We use Bayesian model averaging techniques to assess the role of different types of structural and institutional variables and their interaction with specific characteristics of the economy, as determinants of employment dynamics for 30 economies in Europe and Central Asia. We find that, once short-run dynamics are controlled for, common structural determinants for the employment rate emerge, including tax rates, human capital, availability of technology, labour market regulation and trade openness. The results show that the effect of labour market regulation on employment outcomes is affected by other characteristics, such as trade openness. Focusing on the trade–labour link, we find that labour market reforms toward a more flexible labour market have a positive impact on employment ratios, and this effect is stronger for economies characterised by relatively low level of trade barriers. In addition, the positive employment effects from labour market regulation reforms are stronger; the less flexible is the initial labour market regulatory framework. These findings bring important policy insights related to the employment potential of further structural reforms and trade integration for the countries in the region. 

North American Journal of Economics and Finance, April 2019, Volume 48, Pages 591-612

This investigation exploits a new database, which merges the balance sheet items of Italian banks with sanctions by Bank of Italy and CONSOB in the last decade. We highlight the informative content of sanctions as key for the success of the supervisory activity. First, we evaluate the effects of sanctions on bank performance: we find a negative impact, more pronounced for those banks that were repeatedly sanctioned, for reasons mainly related to risk assessment and funding strategies. Second, we identify a set of bank ratios related to sanctions: we find a strong predictive power of indicators related to efficiency, productivity, and both funding and asset management. Overall, we show that after the first sanction several banks were not able to correct their strategies to avoid further penalties, because likely they were not provided with enough information on the motivations behind sanctions, hence on the required adjustments. 

Rivista Bancaria - Minerva Bancaria, 2018, issue 2-3

Rivista Bancaria - Minerva Bancaria, 2014, issue 2-3