This paper introduces the Global Multi-country (GM) model, an estimated multi-country Dynamic Stochastic General Equilibrium (DSGE) model of the world economy. We present the model in 3-region configurations for Euro area (EA) countries... more
This paper introduces the Global Multi-country (GM) model, an estimated multi-country Dynamic Stochastic General Equilibrium (DSGE) model of the world economy. We present the model in 3-region
configurations for Euro area (EA) countries that include an individual EA Member State, the rest of the EA (REA), and the rest of the world (RoW). We provide and compare estimates of this model structure for the
four largest EA countries (Germany, France, Italy, and Spain). The novelty of the paper is the estimation of ex-ante identical country models on the basis of a unified information set, which allows for clean cross-country
comparison of parameter estimates and drivers of economic dynamics. The paper also provides an overview of applications of the GM model such as the structural interpretation of business cycle dynamics,
the contribution to the European Commission’s economic forecast, the scenario analysis and policy counterfactuals.
configurations for Euro area (EA) countries that include an individual EA Member State, the rest of the EA (REA), and the rest of the world (RoW). We provide and compare estimates of this model structure for the
four largest EA countries (Germany, France, Italy, and Spain). The novelty of the paper is the estimation of ex-ante identical country models on the basis of a unified information set, which allows for clean cross-country
comparison of parameter estimates and drivers of economic dynamics. The paper also provides an overview of applications of the GM model such as the structural interpretation of business cycle dynamics,
the contribution to the European Commission’s economic forecast, the scenario analysis and policy counterfactuals.
Research Interests:
In this paper, we adopt a Ramsey-optimal approach to the identification of debt reduc- tion strategies, that is, the optimal policy mix for labor and capital income taxes, public expenditures and ináation designed to achieve an exogenous... more
In this paper, we adopt a Ramsey-optimal approach to the identification of debt reduc- tion strategies, that is, the optimal policy mix for labor and capital income taxes, public expenditures and ináation designed to achieve an exogenous debt reduction path. Our model accounts for monopoly profits, limited asset market participation and asset holdersíinfrequent optimization of their portfolio composition between money holdings and other Önancial as- sets. The optimal policy envisages persistent reductions in public consumption and increases in taxes and ináation. Distributional conáicts arise between asset owners and the rest of the population. When asset holders interests are relatively less important in the plannerís objective function, labor income taxes are drastically reduced whereas capital income taxes and ináation are increased. Just in this case the consolidation has short term expansionary effects.
In letteratura si assume generalmente che gli agenti siano dotati di perfetta razionalità e quindi siano in grado di anticipare l'evoluzione del sistema economico. Partendo dalla letteratura sull'apprendimento adattivo, si... more
In letteratura si assume generalmente che gli agenti siano dotati di perfetta razionalità e quindi siano in grado di anticipare l'evoluzione del sistema economico. Partendo dalla letteratura sull'apprendimento adattivo, si ipotizza che gli agenti si comportino come econometrici, aggiustando le proprie previsioni mano a mano che i dati diventano disponibili. Il primo capitolo analizza l'apprendimento dell'equilibrio da parte degli agenti in presenza di un meccanismo di trasmissione del cost channel. Supponendo che la Banca Centrale operi in regime discrezionale, si osserva che una politica monetaria che risponde all'aspettative garantisce la determinatezza dell'economia solo se la banca centrale dimostra una minor preferenza per la stabilizzazione dell'output. Tuttavia, l'area di determinatezza dell'equilibrio si allarga se la banca centrale stabilizza anche il tasso di interesse. La seconda parte della tesi si concentra invece sul ruolo della stab...
This paper examines whether the presence of parameter instabilities in dynamic stochastic general equilibrium (DSGE) models affects their forecasting performance. We apply this analysis to medium-scale DSGE models with and without... more
This paper examines whether the presence of parameter instabilities in dynamic stochastic general equilibrium (DSGE) models affects their forecasting performance. We apply this analysis to medium-scale DSGE models with and without financial frictions for the US economy. Over the forecast period 2001-2013, the models augmented with financial frictions lead to an improvement in forecasts for inflation and the short term interest rate, while for GDP growth rate the performance depends on the horizon/period. We interpret this finding taking into account parameters instabilities. Fluctuation test shows that models with financial frictions outperform in forecasting inflation but not the GDP growth rate.
Research Interests:
Recently there has been an increasing awareness on the role that the banking sector can play in macroeconomic activity, especially within the context of the DSGE literature. In this work, we present a DSGE model with Önancial... more
Recently there has been an increasing awareness on the role that the banking sector can play in macroeconomic activity, especially within the context of the DSGE literature. In this work, we present a DSGE model with Önancial intermediation as in Gertler and Karadi (2011). The estimation of the shocks and of the structural parameters shows that time-variation can be crucial in the empirical analysis. As DSGE modelling fails to take into account inherent nonlinearities of the economy, we introduce a novel time-varying coe¢ cient state-space estimation method for VAR processes, for homoskedastic and heteroskedastic error structures (TVP-VAR). We conduct an extensive empirical exercise to compare the out-of-sample forecastability of the DSGE model versus standard ARs, VARs, Bayesian VARs and TVP-VARs. We Önd that the TVP-VAR provides the best forecasting performance for the series of GDP and net worth of Önancial intermediaries for all steps-ahead, while the DSGE model with the incorporation of a banking sector outperforms the other speciÖcations in forecasting ináation and the federal funds rate at shorter horizons.
Research Interests:
We present a heterogeneous agents New-Keynesian model subject to a cost channel of monetary policy transmission. Constant turnover between long-time traders and newcomers in market activities, combined with restricted trading... more
We present a heterogeneous agents New-Keynesian model subject to a cost channel of monetary policy transmission. Constant turnover between long-time traders and newcomers in market activities, combined with restricted trading opportunities, introduces a feedback from the stock market to real activity, making stock prices non-redundant for the business cycle. We show that strict inflation targeting can lead to equilibrium indeterminacy, even if the policy rule satisfies the Taylor principle. A belief-driven shock to stock price generates relative volatilities of key financial variables which are very close to what is observed in U.S. data. This result hints to the possibility that the financial instability witnessed since the mid-to-late 1990s was the result of waves of (rational) exuberance and pessimism in financial markets. Our analysis suggests that a mild response to stock prices in the central bank's policy rule can restore equilibrium determinacy and therefore rule out non-fundamental volatility.