Publications
Endogenous Uncertainty and the Macroeconomic Impact of Shocks to Inflation Expectations, with Guido Ascari (DNB, Univ. of Pavia), Jakob Grazzini (Univ. of Pavia), and Lorenza Rossi (Lancaster University, Univ. of Pavia), Journal of Monetary Economics (2023).
Abstract: A shock that increases short-term inflation expectations has negative macroeconomic effects, increasing inflation and decreasing output. The third-order solution of a rich DSGE model with firm dynamics shows that the endogenous increase in uncertainty is key for both amplifying the transmission mechanism and providing robust sign restrictions to identify the inflation expectations shock in an empirical VAR. The model, estimated using limited information impulse response matching techniques, shows the importance of endogenous uncertainty and firm dynamics for the transmission mechanism of an inflation expectations shock. Furthermore, shocks that increase inflation expectations have stronger effects than shocks that reduce inflation expectations.
Monetary Policy Uncertainty and Firm Dynamics, with Haroon Mumtaz (Queen Mary, Univ. of London) and Lorenza Rossi (Lancaster University, Univ. of Pavia), Review of Economic Dynamics (2023). replication code
Abstract: This paper uses a FAVAR model with external instruments to show that monetary policy uncertainty shocks are recessionary and are associated with an increase in firms' exit and a decrease in firms' entry. At the same time, the stock price declines, while the TFP increases in the medium run. To explain this result, we build up and estimate a medium-scale DSGE model featuring firm heterogeneity and endogenous firm entry and exit. These features are crucial in matching the empirical responses. The baseline model outperforms an alternative model without firm dynamics in reproducing the FAVAR responses and implies a larger effect of monetary policy uncertainty shock on the real economic activity.
Are Uncertainty Shocks Aggregate Demand Shocks?, with Lorenza Rossi (University of Pavia), Economics Letters (2018). Online Appendix
Abstract: This note considers the Leduc and Liu (JME, 2016) model and studies the effects of their uncertainty shock under different Taylor-type rules. It shows that both the responses of real and nominal variables highly depend on the Taylor rule considered. Remarkably, inflation reacts positively so that uncertainty shocks look more like negative supply shocks, once an empirically plausible degree of interest rate smoothing is taken into account. This result is reinforced with less reactive monetary rules. Overall, these rules alleviate the recession.
Works in progress
Firm Entry, Endogenous Wage Moderation, and Labor Market Dynamics, with Andrea Colciago (De Nederlandsche Bank, Univ. of Milan Bicocca) and Lorenza Rossi (Lancaster University)
Updated version, Online Appendix, Slides (Lancaster, May 2022),
DNB Working Paper, QMUL-SEF Working Paper
Nonlinearities with de-anchored inflation expectations, with Mirela Miescu (Lancaster University) and Lorenza Rossi (Lancaster University) - Updated version
Unemployment, Inflation, and Uncertainty in the Frequency Domain, with Mirela Miescu (Lancaster University)
Slides (Lancaster, December 2023)
Environmental Policy and Carbon Leakage: The Case of Multinationals, with Anthony Priolo (Lancaster University)
What differ first moment and second moment monetary shocks?, with Haroon Mumtaz (Queen Mary, Univ. of London) and Lorenza Rossi (Lancaster University)
working papers
On the Long-run Unemployment, Inflation, and Volatility
QMUL-SEF Working Paper, DEMS Working Paper, CEIS Research Paper
Unemployment and Nominal Volatility at low frequency: a Bayesian TVP-VAR approach