Working Papers

Consumption in the time of Covid-19: Evidence from UK transaction-level data (with Sinem Hacioglu Hoke and Paolo Surico) [paper]

Abstract: Using transaction data from a large Fintech company, we document a decline of 40% to 50% in the spending of British households during the Covid-19 crisis. The fall is concentrated in services such as retail, restaurants and transportation. The initial rise in on-line shopping and groceries purchases has been subsequently reverted. Income reductions have become far more frequent, with a median decline around 30%. The share of borrowers facing financing issues has increased significantly for both secured and unsecured lending. Consumption and income inequality have surged, with the most economically vulnerable groups experiencing the largest percentage decline. Mortgagors and higher earners in London record the most sizable pound change.

Media coverage: Financial Times, The Times, Wheeler Institute Video Series

Capital, Income Inequality, and Consumption: the Missing Link (with Florin Bilbiie and Paolo Surico) [paper]

Abstract: A novel complementarity between capital and income inequality leads to a significant amplification of the effects of monetary policy on consumption: a multiplier of the multiplier. We characterize this finding analytically, in a simple saver-spender model, and quantitatively, in a framework featuring nominal rigidities, capital investment, idiosyncratic risk and heterogeneity in household saving and income. A fiscal policy that redistributes capital income yields further amplification, whereas redistributing profits dampens the effects of monetary policy. Our model generates the prediction that consumption inequality is more counter-cyclical than income inequality after an interest rate shock, consistent with the available empirical evidence.

The macroeconomic effects of oil supply news: Evidence from OPEC announcements [paper] [slides] [shock series]

Abstract: 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.


International inflation spillovers – the role of different shocks (with Gregor Bäurle and Matthias Gubler) [paper] [online appendix], forthcoming at IJCB

Abstract: 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.

Master Thesis

Monetary Policy and Economic Inequality in the United States [online version] [newsletter]

Abstract: This thesis studies the link between monetary policy and inequality in the United States. In a first, empirical part of the thesis, I provide some evidence regarding the distributive consequences of monetary policy shocks during the Great Moderation period from a structural VAR. I find that contractionary monetary policy shocks lead to a significant increase in consumption inequality. Furthermore, monetary policy shocks explain a non-negligible part of the variations in inequality at business cycle frequencies. In the second, theoretical part, I propose a DSGE model that can account for these findings. The model is a variant of the New Keynesian model featuring substantial but limited heterogeneity on the part of the households. The tractability of the framework allows me to estimate the model based on data for the United States. The conjectured limited heterogeneity equilibrium turns out to be consistent with the data and the estimated model is able to match the evolution of economic inequality in the data remarkably well. Most importantly, its predictions regarding the redistributive effects of monetary policy shocks are qualitatively in line with the empirical evidence: contractionary monetary policy shocks lead to an increase in consumption inequality and explain non-negligible fractions of its variance. Sensitivity analyses suggest that these findings are extraordinarily robust along a number of dimensions and can in principle be even more pronounced. In particular, the redistributive effects get stronger when the central bank is more dovish, when the degree of nominal rigidities increases, or when the borrowing limit is less restrictive.