Research
Research
Working paper
This paper investigates the relationship between invoicing currency and input-output (I-O) linkages in global trade. Specifically, the paper explores how countries respond to dollar appreciation resulting from contractionary US monetary policy. I propose a theoretical and quantitative framework to analyze this impact, taking into account the exogenous currency of invoicing with I-O linkages. The model suggests that the response to dollar appreciation depends on the interaction between dollar invoicing shares and foreign intermediate input shares. To quantify the effect, a multi-country dynamic general equilibrium model is built with calibrated I-O linkages and invoicing shares. The quantitative results show that the expenditure switching of the calibrated model is muted in half compared to a model with full dollar invoicing. This research sheds light on the importance of invoicing currency and I-O linkages in global trade, and provides implications on the global monetary policy.
Monetary Policy under Network-Level Bottlenecks with Galip Kemal Ozhan, Nick Sander, Sebastian Wende
This paper examines monetary policy under temporary, sector‑level supply bottlenecks using a rich production‑network framework. We first show that binding sectoral constraints steepen the aggregate supply curve and introduce novel trade‑offs when interacting with demand shifts. We then embed this mechanism in a calibrated two‑region, multi‑sector New Keynesian model with occasionally binding constraints. First, we use the model to generate policy lessons when some sectors in the economy face supply constraints while others may face deficient demand. Second, we fit the model to 2020–24 and quantify how bottlenecks amplified inflation and output volatility during COVID‑19. Unlike standard supply shocks, temporary sectoral constraints create a trade-off between economic stability when constrained and economic stability afterwards—so that crisis‑period focus can worsen later aggregate adjustments. We also show that coordinated tightening across regions mitigates inflation spillovers through the production network, indicating that the global slack is an important independent determinant of domestic inflation.
Book Chapters/Policy work
What if? The Effects of a Hard Decoupling from China on the German Economy with David Baqaee, Julian Hinz, Benjamin Moll, Moritz Schularick, Feodora Teti, Joschka Wanner
Paris Report 2: Europe's Economic Security, Jean Pisani-Ferry, Beatrice Weder di Mauro, and Jeromin Zettelmeyer (eds), CEPR Press, Paris & London. May 2024.
The Great Tightening: Insights from the Recent Inflation Episode with Jorge Alvarez (co-lead), Emine Boz (co-lead), Thomas Kroen, Alberto Musso, Galip Kemal Ozhan, Nicholas Sander, Sebastian Wende
Chapter 2 in the IMF World Economic Outlook, October 2024
Work in progress
Coping Capacity of Production Network to Climate Shocks: A Multi-regional Analysis with Florent McIsaac
Indirect economic cost of disasters: A multi-model intercomparison, from CGE to ABM with P. Astudillo Estevez, J.D. Robalino, M.A. Christensen, C.Colon, S. Hallegatte, S. Juhel, F.J. McIsaac