Working papers

Greed? Profits, Inflation, and Aggregate Demand (with Florin Bilbiie) [ungated version] [working paper]


We investigate the interplay of corporate profits and income distribution in shaping inflation and aggregate demand within the New Keynesian framework. We derive an analytical condition for profits to be procyclical and inflationary. The profit cyclicality is a key determinant of the model’s propagation properties under household heterogeneity, but for aggregate-demand fluctuations to be amplified by heterogeneity, profits have to be countercyclical—an implication at odds with the data. When adding capital investment, there can be aggregate-demand amplification under procyclical profits but it works through an investment channel and not profits, inconsistent with the narrative attributing inflation to corporate greed.

The Unequal Economic Consequences of Carbon Pricing [ungated version] [working paper] [slides] [shock series], revise & resubmit at American Economic Review

Abstract and coverage

This paper studies the economic impacts of carbon pricing. Exploiting institutional features of the European carbon market and high-frequency data, I document that a tighter carbon pricing regime leads to higher energy prices, lower emissions and more green innovation. This comes at the cost of a fall in economic activity, which is borne unequally across society: poorer households lower their consumption significantly while richer households are less affected. The poor are more exposed because of their higher energy share and, importantly, also experience a larger fall in income. Targeted fiscal policy can help alleviate these costs while maintaining emission reductions.

Media coverage: The Economist, VoxEU, econimate

Awards: Winner ECB Young Economists' Competition, AQR PhD Fellowship Award, Wheeler Institute for Business and Development PhD Award, IAEE Best Student Paper Award, Finalist QCGBF Young Economist Prize Competition

Climate Policy and the Economy: Evidence from Europe's Carbon Pricing Initiatives (with Max Konradt) [ungated version] [working paper], revise & resubmit at IMF Economic Review

Abstract and coverage

This paper investigates the impact of carbon pricing on the economy, with a focus on European carbon taxes and the carbon market. Our analysis reveals three key findings. First, while both policies have successfully reduced emissions, the economic costs of the European carbon market are larger than for national carbon taxes. Second, we explore four factors that explain this difference: fiscal policy and revenue recycling, pass-through and sectoral coverage, spillovers and leakage, and monetary policy. Our findings suggest that all four factors play a significant role. Third, we document substantial regional heterogeneity in the impacts of the carbon market, which crucially depend  on the share of freely allocated emission permits and the degree of market concentration in the power sector.

Media coverage: The Economist, VoxEU, Hutchins Roundup, Green Fiscal Policy Network     


Capital and Income Inequality: an Aggregate-Demand Complementarity (with Florin Bilbiie and Paolo Surico) [article] [working paper] [slides] [replication files], Journal of Monetary Economics, 126, 2022, 154-169 


A novel complementarity between capital and income inequality leads to a significant amplification of the effects of aggregate-demand shocks on consumption. We characterize this finding using a simple model with heterogeneity in household saving and income, nominal rigidities, and capital. A fiscal policy that redistributes capital income causes further amplification, whereas redistributing profits generates dampening. After an interest rate shock, consumption inequality is more countercyclical than income inequality, consistent with the available empirical evidence. Procyclical investment also requires a more aggressive Taylor rule in order to attain determinacy, and aggravates the forward guidance puzzle.

The macroeconomic effects of oil supply news: Evidence from OPEC announcements [article] [working paper] [slides] [shock series] [replication main results] [full replication package], American Economic Review, 111(4), 2021, 1092-1125

Abstract and coverage

This paper proposes a novel approach to study the macroeconomic effects of oil prices, exploiting institutional features of OPEC and high-frequency data. Using variation in futures prices around OPEC announcements as an instrument, I identify an oil supply news shock. These shocks have statistically and economically significant effects. Negative news leads to an immediate increase in oil prices, a gradual fall in oil production and an increase in inventories. This has consequences for the U.S. economy: activity falls, prices and inflation expectations rise, and the dollar depreciates – providing evidence for a strong channel operating through supply expectations.

Media coverage: AEA Chart of the Week  

The Distributional Impact of the Pandemic (with Sinem Hacioglu Hoke and Paolo Surico) [article] [working paper] [slides] [previous version], European Economic Review, 134, 2021, 103680 

Abstract and coverage

The top quartile of the income distribution accounts for almost half of the pandemic-related decline in aggregate consumption, with expenditure for this group falling much more than income. In contrast, the bottom quartile of the income distribution has seen the smallest spending cuts and the largest earnings drop but their total incomes have fallen by much less because of the increase in government benefits. The decline in consumers’ spending preceded the introduction of the lockdown, whose partial lifting has triggered a stronger recovery in sectors with a lower contact rate. The largest spending contractions are concentrated in the most affluent regions. These conclusions are based on detailed high-frequency transaction data on spending, earnings and income from a large Fintech company in the United Kingdom. 

Media coverage: Financial Times, The Times, Economics Observatory, Bank Underground, Wheeler Institute Video Series 

International inflation spillovers – the role of different shocks (with Gregor Bäurle and Matthias Gubler) [article] [working paper] [online appendix], International Journal of Central Banking, 17(1), 2021, 191-230


How do international price fluctuations spill over to country-specific inflation? In this paper, we show that accounting for the drivers of international inflation and their effects on overall economic conditions is crucial to getting a more thorough view of spillover effects. We  find substantial heterogeneity in the magnitude of spillovers, depending on the shocks driving inflation abroad. While all identified shocks are inflationary, their effects on activity, interest and exchange rates differ. Looking at the responses of disaggregated prices suggests that these general equilibrium effects are indeed important. We show this by looking at spillovers to Switzerland through the lens of a structural dynamic factor model that relates a large set of disaggregated prices to key macroeconomic factors. 

Work in Progress

The macroeconomic effects of climate policy uncertainty (with Costas Gavriilidis and Jim Stock

Carbon leakage to developing countries (with Julian Marenz and Marcel Olbert)