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Research
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Abstract: I examine how households adjust the quality of their purchases in response to adverse economic shocks. Using household scanner data from Germany, I document heterogeneous responses across income levels. Higher-income households tend to reduce the quality of the goods they purchase, whereas lower-income households—who typically consume lower-quality goods—show a limited propensity to trade down, likely due to a limited ability to do so. To assess the general equilibrium effects of an aggregate shift in demand toward lower-quality varieties, I implement a shift-share research design. This approach leverages two key components: (i) pre-determined spending shares on middle-quality varieties across the product space for a wide range of sociodemographic groups prior to the Great Financial Crisis, and (ii) variation in population growth across these groups during the crisis. I find that a 1% aggregate demand shift toward lower-quality varieties following a recession raises the relative price of low-quality varieties by an additional 0.5%, and by 1.9% relative to high-quality varieties, on average.
Abstract: This paper examines whether firm-specific cyclical and idiosyncratic risk profiles influence corporate bond spreads and the transmission of monetary policy. I extend the standard excess bond premium (EBP) framework of Gilchrist and Zakrajšek (2012) to allow investors’ required compensation for default risk to vary with firm-level risks. Incorporating these effects reveals that a significantly larger share of a monetary policy shock’s impact on credit spreads is driven by changes in default risk compensation (as opposed to the EBP). In particular, for firms with more cyclical risk, up to one-fourth of the additional spread widening following a contractionary monetary policy shock reflects higher expected default compensation, substantially more than implied by the traditional EBP. By contrast, firms with high idiosyncratic risk show no strong differential response to monetary policy shocks relative to other firms.
With Meredith Crowley, Elisa Faraglia, Chryssi Giannitsarou and Lea Havemeister
Abstract: Geopolitical uncertainty alters the incentives of firms to organise their corporate structure across borders, creating a distinct margin of adjustment in response to policy risk. We study this margin using the Brexit referendum as a quasi-natural experiment. We combine firm level data on parent-subsidiary links for UK and EU firms between 2011 and 2021 with measures of Brexit-related uncertainty and study changes in foreign subsidiary formation at the extensive margin. Following the referendum, there was an increase in the number of subsidiary formation from the UK into the EU, while the number of EU firms that expanded with subsidiaries into the UK dropped. UK firms establishing their first EU subsidiary after the referendum were systematically weaker ex ante than comparable firms that did so before the referendum. Increased Brexit-related uncertainty is associated with increased foreign subsidiary formation from the UK into the EU, driven primarily by small firms, alongside suggestive evidence of decreased domestic subsidiary incorporation by UK firms. We interpret these findings as evidence of a `precautionary' foreign direct investment channel, operating through changes in the corporate structures of firms in response to geopolitical uncertainty.
Consumption risk, inequality and the real exchange rate
Consumption risk, inequality and the real exchange rate
With Giancarlo Corsetti and Luca Dedola
Abstract: We investigate whether and how heterogeneity in consumption risk and inflation across households affect consumption demand and growth under the lens of an incomplete markets framework. Our model of household-level risk sharing imposes minimal restrictions on the financial market structure, allowing for both aggregate and idiosyncratic tradeable risks to be at least partially diversified and for precautionary saving motives. We bring the model to bear on empirical evidence, using household-level scanner data from Euro area regions and United Kingdom, together with a matching model for financial market participation. Our contribution is twofold: first, we develop a theoretical framework mapping consumption (rather than income) risk and inflation differentials onto consumption growth at regional level; second, we assess theoretical conditions empirically, exploiting heterogeneity in risk and risk sharing, by preference, income, residence and participation in financial markets. Our empirical analysis provides evidence that tradeable risk is insured primarily among financial market participants, and across regions of the euro area than regions across the border (provided that differences in inflation are accounted for). Consumption risk, proxied using variability of consumption growth within regions and income groups, weigh on consumption demand.
ECB exchange rate communication
ECB exchange rate communication
With Fabio Comazzi, Michael Ehrmann, Massimo Ferrari Minesso and Arnaud Mehl
Abstract: We revisit the debate on the effectiveness of central bank communication on exchange rates, contrasting a skeptical view, which holds that communication neither moves exchange rates nor influences them in the desired direction, with an optimistic view that it does. Using nearly 100 official ECB statements on exchange rates made during its monetary policy press conferences since 2002, we show that the ECB tends to mention the exchange rate when the real effective exchange rate deviates from its equilibrium value, whereas journalists' questions are mainly responsive to the nominal exchange rate. Studying the effects of these mentions, our findings by and large support the skeptical view: after controlling for monetary policy shocks, exchange rate communication has limited immediate effects on the euro exchange rate, which fade quickly. Effectiveness is particularly limited when interest rates are at their effective lower bound.
Selected policy work
Economic Bulletin Issue 3, 2025.
With Martina Jančoková
Chapter 2, The European Recovery: Policy Recalibration and Sectoral Reallocation.
October 2021 Regional Economic Outlook. International Monetary Fund.
With Anil Ari and Jean-Marc Atsebi
Book chapters
UK Regulation after Brexit revisited
Part II, Trade
Hussain Kassim, Cleo Davies, Andrew Jordan, and Sean Ennis eds. (2022)
With Meredith Crowley, Elisa Faraglia and Chryssi Giannitsarou
Emerging Europe's chronic distrust: Lessons from the region's COVID puzzle
Emerging Europe's chronic distrust: Lessons from the region's COVID puzzle
Takáts, Előd and Nagy-Mohácsi, Piroska, eds. (2022)
Corvinus University of Budapest, Budapest.
With Anil Ari and Jean-Marc Atsebi
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