**Revised April 2025** "Unconventional Policy and Idiosyncratic Risk", DISSE Working Paper n.7/2022 (with M. Seccareccia).
Abstract. Idiosyncratic uncertainty implies an additional channel that amplifies the transmission of persistent balance-sheet policies, through their effect on consumption risk. Through this channel, unconventional policy improves the central bank’s ability to anchor private-sector expectations and to complement interest-rate policy in particular in response to deleveraging crises that expose the economy to the ELB on the policy rate. An application to the Great Financial Crisis suggests a key role of unconventional policy in managing the deleveraging cycle: while the natural interest rate is endogenous to private indebtedness—as in Benigno et al (2020)—the welfare-relevant target interest rate is not. The optimal policy response to debt deleveraging is in fact an unconventional one, it is associated to a shorter—rather than longer—optimal duration of zero interest-rate policies, and it does not involve front-loaded inflation during the ELB episode.
- Also available at SSRN. Previously circulated with the title "Unconventional Monetary Policy and Inequality"
**NEW** "The U-Shaped Growth Equation", In progress (with M. D'Amico)
Abstract. We present empirical evidence supporting a non-monotonic relationship between employment and productivity growth, using data from the US. We then study the theoretical implications of such U-shaped relation in a “Keynesian Growth” framework with heterogeneous innovation, which reconciles the market-size and opportunity-cost views of technological change. We show that a U-shaped growth equation can rationalize the existence of locally determinate equilibria with unemployment and low growth in a liquidity trap. We also show that growth policy incentivising exploratory research activities leading to radical innovation can both prevent the exposure to unemployment equilibria and help the economy escape them.