Working papers

The Macroeconomic Impact of Climate Change: Global vs. Local Temperature (with Adrien Bilal) [ungated version] [working paper] [slides]

Abstract and coverage

This paper estimates that the macroeconomic damages from climate change are six times larger than previously thought. We exploit natural variability in global temperature and rely on time-series variation. A 1°C increase in global temperature leads to a 12% decline in world GDP. Global temperature shocks correlate much more strongly with extreme climatic events than the country-level temperature shocks commonly used in the panel literature, explaining why our estimate is substantially larger. We use our reduced-form evidence to estimate structural damage functions in a standard neoclassical growth model. Our results imply a Social Cost of Carbon of $1,056 per ton of carbon dioxide. A business-as-usual warming scenario leads to a present value welfare loss of 31%. Both are multiple orders of magnitude above previous estimates and imply that unilateral decarbonization policy is cost-effective for large countries such as the United States.

Media coverage: Bloomberg, The Guardian, The Economist, Globe and Mail, Neue Zürcher Zeitung, Le Monde, Les Echos, Les Echos (Opinion), Le Figaro, La Presse, La Repubblica, EURACTIV Italia, Business Standard, The Bulletin, Indian Express, Al Mayadeen, Maeil Business Newspaper, Climate Pod, Radio France Internationale, BFM TV, MSN Money, American Enterprise Institute, Daily Kos, Institut Avant Garde, The Ink, Table Climate, PreventionWeb, Nature World News, Business Green, Semafor, Twitter thread   

Carbon Leakage to Developing Countries (with Julian Marenz and Marcel Olbert) [working paper]


How do climate policies in developed countries spill over to the developing world? Using a novel dataset that combines multinational firms' subsidiary locations with spatial emission data, we study how the carbon footprint of multinational firms in Africa changes in response to more stringent climate policies in Europe. Exploiting variation in multinationals' exposure to carbon prices across European countries, we find that emissions of their African subsidiaries increase as the multinationals' European operations face higher carbon prices. At the same time, multinationals reduce their domestic investment in Europe while worldwide investment remains unchanged -- consistent with the notion that these firms shift some of their operations abroad. We confirm these results at the aggregate level, documenting a significant increase in economic activity and emissions in Africa. Policies to mitigate leakage should thus balance environmental concerns against development and equity considerations. 

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

Abstract and coverage

We investigate whether profits can drive inflation through the interplay of income distribution and aggregate demand—our definition of “greed”—within the New Keynesian framework. We derive an analytical condition for profits to be demand-procyclical and inflationary. When distributional mechanisms are essential, a conundrum emerges: procyclical profits accruing to low-MPC asset-holders imply aggregate dampening and deflation—the opposite of greedflation. Adding capital investment delivers aggregate-demand amplification even under procyclical profits, but the latter are still deflationary. Countercyclical income risk can amplify inflation; yet since this operates through precautionary savings, not profits, it is still inconsistent with the direct “greed” narrative.

Media coverage: Twitter thread    

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, econimate, VoxEU, Twitter thread   

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], forthcoming at IMF Economic Review

Abstract and coverage

This paper examines 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 point to important differences in pass-through and revenue use that help reconcile the differential effects between the two policies. Third, we document substantial regional heterogeneity in the impacts of the carbon market, which 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.

Media coverage: Twitter thread   

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, Twitter thread   

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 Drivers of Energy-saving Technical Change (with Charles Williamson)

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


The Real Effects of China’s Carbon Dioxide Emissions Trading Program, by Jingzhe Liu and Hao Wang 

NBER-SAIF Climate Finance and the Sustainable Energy Transition, Spring 2024

Food Policy in a Warming World, by Allan Hsiao, Jacob Moscona, Karthik Sastry

Macroeconomics of Climate Change Conference, Harvard Salata Institute, Spring 2024

Evaluating Policy Counterfactuals: A “VAR-Plus” Approach, by Tomás E. Caravello, Alisdair McKay, Christian K. Wolf

NBER Monetary Economics Program Meeting, Spring 2024

Food, Fuel, and Facts: Distributional Effects of Global Price Shocks, by Saroj Bhattarai, Arpita Chatterjee, Gautham Udupa

ASSA Annual Meeting, 2024