Working Papers
Awards: ECB Lamfalussy Research Fellowship 2023; AQR Asset Management Institute Fellowship Award 2023-24; 2024 Ieke van den Burg Prize (ESRB Advisory Scientific Committee); ECB Young Economist Prize 2024
Conference presentations: LSE-Oxford Workshop on International Macroeconomics and Finance (London, May 2024); CEPR ESSIM 2024; ESEM Rotterdam 2024; ESRB Annual Conference 2024; BdF Global Currencies Workshop 2024; BdF Conference on Monetary Policy 2025
Online Appendix; Extended version: BIS Working Paper (2025)
with Silvia Miranda-Agrippino and Hélène Rey.
with Andreas Schrimpf and Hyun Song Shin.
with Silvia Miranda-Agrippino and Hélène Rey, Centre for Macroeconomics, Discussion Paper n. 2020-04.
Published Papers
with Silvia Miranda-Agrippino, Journal of International Economics, Vol. 136, 103606, May 2022.
Abstract: We compare the macroeconomic and financial spillovers of the unconventional monetary policies of the Fed and the ECB. Monetary policy tightenings in the two areas are followed by a contraction in global activity and trade, a retrenchment in global capital flows, a fall in global stock markets, and a rise in risk aversion. Bilateral spillovers in both directions are also powerful. We find that Fed and ECB monetary policies propagate internationally through the same channels – trade and risk-taking. While the magnitude of ECB spillovers to global aggregates is smaller, proxies for global risk aversion respond in the same way and to the same degree to ECB and Fed unconventional monetary policy shocks, pointing to an equally powerful risk-taking channel for their international transmission that operates through global financial markets. Spillovers of the unconventional policies of the two central banks to international asset prices are equivalent to a very large extent.
Versions: CEPR Discussion Paper (2021)* Extended version, BoE Working Paper (2022)
with Kristin Forbes and Ida Hjortsoe, IMF Economic Review, Vol. 68(4), pages 721-763, December 2020.
Abstract: We analyse the economic conditions (the “shocks”) behind currency movements and show how that analysis can help address a range of questions, focussing on exchange rate pass-through to prices. We build on a methodology previously developed for the UK and adapt this framework so that it can be applied to a diverse sample of countries using widely available data. The paper provides three examples of how this enriched methodology can be used to provide insights into pass-through and other questions. First, it shows that exchange rate movements caused by monetary policy shocks consistently correspond to significantly higher pass-through than those caused by demand shocks in a cross-section of countries, confirming earlier results for the UK. Second, it shows that the underlying shocks (especially monetary policy shocks) are particularly important for understanding the time-series dimension of pass-through, while the standard structural variables highlighted in the previous literature are most important for the cross-section dimension. Finally, the paper explores how the methodology can be used to shed light on the effects of monetary policy and the debate on “currency wars”: it shows that the role of monetary policy shocks in driving the exchange rate has increased moderately since the global financial crisis in advanced economies.
Versions: CEPR DP (2020), NBER WP (2020), MIT Sloan Research Paper (2018), BoE Discussion Paper (2017)* Extended version
with Kristin Forbes and Ida Hjortsoe, Journal of International Economics, Vol. 114, Sep 2018, pp. 255-275.
Abstract: A major challenge for monetary policy is predicting how exchange rate movements will impact inflation. We propose a new focus: directly incorporating the underlying shocks that cause exchange rate fluctuations when evaluating how these fluctuations “pass through” to import and consumer prices. A standard open-economy model shows that the relationship between exchange rates and prices depends on the shocks which cause the exchange rate to move. We build on this to develop a structural Vector Autoregression (SVAR) framework for a small open economy and apply it to the UK. We show that prices respond differently to exchange rate movements based on what caused the movements. For example, exchange rate pass-through is low in response to domestic demand shocks and relatively high in response to domestic monetary policy shocks. This framework can improve our ability to estimate how pass-through can change over short periods of time. For example, it can explain why sterling's post-crisis depreciation caused a sharper increase in prices than expected, while the effect of sterling's 2013–15 appreciation was more muted. We also apply this framework to forecast the extent of pass-through from sterling's sharp depreciation corresponding to the UK's vote to leave the European Union.
Versions: CEPR DP (2018), NBER WP (2018), MIT Sloan Research Paper (2015), BoE Discussion Paper (2015)
Online Appendix, Replication files
with Kristin Forbes and Ida Hjortsoe, The Economic Journal, Vol. 127, Issue 601, May 2017, pp. 571-623.
Abstract: Large current account deficits, and the corresponding reliance on capital flows from abroad, can increase a country’s vulnerability to periods of heightened risk. We develop a framework to evaluate such vulnerabilities and clarify which characteristics of a country’s international investment portfolio determine whether a current account deficit is ’menacing’ or ’mitigating’. Financial factors, namely international investment income and valuation changes on international investments, are critical. Our framework explores how domestic and global risk shocks affect these factors. An application to 10 OECD economies shows that a substantial degree of international risk sharing can occur through current accounts and international portfolios.
Versions: NBER WP (2016), MIT Sloan Research Paper (2016), BoE Discussion Paper (2016)