Research
Here my page at Ideas
Firm Entry, Endogenous Wage Moderation, and Labor Market Dynamics, with Andrea Colciago (De Nederlandsche Bank, Univ. of Milan Bicocca) and Lorenza Rossi (Lancaster University), European Economic Review (2025). Online Appendix. replication code
Abstract: Profit-seeking is a key driver of new business creation, which, in turn, significantly influences unemployment dynamics. This paper uses US data to estimate the joint responses of firm entry, profits, unemployment, hours worked, and other aggregates to commonly studied supply shocks. Our analysis finds a positive correlation between firm entry, profits, and total hours worked, alongside a negative correlation with the unemployment rate. We develop and estimate a general equilibrium model that captures these dynamics.
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.
Nonlinearities with de-anchored inflation expectations, with Mirela Miescu (Lancaster University) and Lorenza Rossi (Lancaster University) - SSRN Working Paper, revise and resubmit in International Economic Review.
Inflation Uncertainty and Unemployment in the Long Run, with Mirela Miescu (Lancaster University) - SSRN Working Paper, Slides (Univ. Milan Bicocca, March 2025), submitted
UPDATED Inflation Uncertainty data:
US index (monthly, 1963:m6-2024:m9, and quarterly, 1964:q3-2024:q3)
UK index (quarterly, 1972:q1-2016:q4)
Belief Distortions and Uncertainty about Inflation, with Giuseppe Pagano Giorgianni (Sapienza University), Valeria Patella (Sapienza University), Lorenza Rossi (Lancaster University) - SSRN Working Paper, Slides (MMF, Sept 2025), submitted
What Drives Downside Risk? Asymmetries in Shocks vs. Economic Transmission, with Domenico Giannone (International Monetary Fund), Lorenza Rossi (Lancaster University)
Equity Premium, Firm Dynamics, and Uncertainty Shocks
Environmental Policy and Carbon Leakage: The Case of Multinationals, with Anthony Priolo (Lancaster University)
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