Working papers

Inequality, Demand Composition, and the Transmission of Monetary Policy (with S. De Ferra, K. Mitman and F. Romei)

We argue that demand composition between tradable and non-tradeable goods and services affects monetary policy transmission in a monetary union. We document at the micro level that within Eurozone countries richer households allocate a greater share of their consumption basket to non-tradables. At the aggregate level, we show that in countries with greater income inequality, non-tradable goods account for a larger share of total consumption. Finally, we show that output responses to identified monetary policy shocks are larger for economies with lower non-tradable consumption shares. We rationalize our micro and macro findings using a two-country heterogeneous-agent model with non-homothetic preferences. We then study the implications for optimal stabilization policy in a currency union.

Economic Consequences of Large Extraction Declines: Lessons for the Green Transition (with R. Bems, A. Pescatori and M. Stuermer)

[WP Version] [VoxEU Column]

Limiting climate change requires a 80 percent reduction in fossil fuel extraction until 2050. What are the macroeconomic consequences for fossil fuel producing countries? We identify 35 episodes of persistent, exogenous declines in extraction based on a new data-set for 13 minerals (oil, gas, coal, metals) and 122 countries since 1950. We use local projections to estimate effects on real output as well as the external and the domestic sectors. Declines in extractive activity lead to persistent negative effects on real GDP and the trade balance. The real exchange rate depreciates but not enough to offset the decline in net exports. Effects on low-income countries are significantly larger than on high-income countries. Results suggest that legacy effects of bad institutions could prevent countries from benefiting from lower resource extraction.

Work in Progress

Corporate Net Lending and Business Density - Does the cycle drive the trend(s)?

Constrained-efficient Capital Reallocation and Monetary Policy (with D. Macaluso)

Policy Publications

IMF World Economic Outlook: Commodity Special Feature: Market Developments and the Macroeconomic Impact of Declines in Fossil Fuel Extraction (with Mehdi Andaloussi, Christian Bogmans, Rachel Brasier, Andrea Pescatori, Ervin Prifti, and Martin Stuermer) IMF World Economic Outlook, April 2023, pp. 30-35