Work in progress

“Cyclical Behavior of Markups: Theory and Firm-level Evidence”¬†(Job Market Paper)

Using confidential firm-level data from the National Bank of Belgium, this paper documents the heterogeneous response of firms’ markups in the aftermath of 2008 financial crisis. The overall markup increased and highly financially constrained firms raised the markup by more. I show that standard heterogeneous-firm models, featuring monopolistic competition and variable markups, are unable to replicate these patterns. Therefore, I introduce endogenous demand shifters which respond to firm investment in market share (e.g. advertising, quality) along the lines of Antoniades (2015). The model shows that the interaction of an increase in the cost of procuring inputs together with an endogenous quality downgrading can rationalize the observed firm-level changes in the markups during the financial crisis.

“Forecasting inflation in the euro area: countries matter!” (with Claudia Pacella*)

We build a Bayesian vector autoregressive model with three layers of information: inflation key drivers, cross-country dynamic interactions and country-specific variables. The model exhibits good forecasting accuracy with respect to popular benchmarks used in the literature. We perform a step-by-step analysis to shed light on which layer of information is more crucial for accurate forecasts of euro area inflation. Our empirical analysis reveals the importance of including inflation key drivers and accounting for the multi-country dimension of the euro area. In particular, the results show that the complete model has overall better forecasting performance for inflation excluding energy and unprocessed food, while a model only based on aggregate euro area variables works relatively better for headline inflation.

*ECARES РUniversité Libre de Bruxelles; Bank of Italy

“Inflation expectations and non-standard monetary policies”

IIn this paper, I analyze the impact of key European Central Bank’s unconventional monetary policy announcements on inflation expectations, measured by Euro Area five-year Inflation Linked Swap rates five years ahead, since the aftermath of the crisis. I control for market liquidity and uncertainty measures, change in oil price shock and macroeconomic news. The results show that the impact of the European Central Bank’s announcements has been positive during the period under observation. Along the line of the expansionary monetary policy measures implemented, the agents have been revising upwards their long term inflation expectations. This means that the unconventional monetary policy measures were effective.