Research

Working Papers:

The Role of Supply Chain in the Import-Pass Through of Prices [JMP]

Presented at Boston College, Sveriges Riksbank, Collegio Carlo Alberto.

We want to study how domestic prices are affected by an import price change, depending on whether they are upstream or downstream in the production chain. As an exogenous instrument to capture variation in imported product prices, we use the supply chain pressure index provided by the NY Fed. We expect that the heterogeneous impact of this import price shock on the economy will vary in magnitude across importers, depending on their openness to the world economy, but will be similar in terms of how it impacts downstream and upstream domestic prices in the economy.

Equity Flows in Uncertain Times: the Role of Heterogeneous Information [Draft]

with Francesco Beraldi and Chenping Yang

Presented at Italian Econometric Association and Bank of Italy (Side WEEE 2024), University of Naples PhD Workshop 2024, Boston College, Sveriges Riksbank, University of Turin, HEC Paris.

We study the role of information heterogeneity in determining capital flows during the global financial cycle. When global uncertainty increases, investors retrench toward their home country and the United States. We build a model of portfolio choice and information acquisition with varying learning costs across countries. Our model replicates the global financial cycle’s stylized facts and has new predictions for forecasting accuracy, which we test using micro forecast data. Domestic forecasters better predict their own country’s economic outcomes, especially with increased global uncertainty. However, the US is an exception, where domestic forecasters do not outperform foreign institutions.

Customer Capital and the Aggregate Effect of Short-Termism [Draft] [SSRN]

with Marco Errico and Luigi Pollio

Presented at the Spring 2023 GLMM BC-BU, at the Federal Reserve Bank of Boston, at the IEA, at the Midwest Macro Meeting (Fall 2023) and at the Econometric Society Conference (Fall 2023).

Managers face continuous pressure to meet short-term forecasts and targets, which can potentially impact firms' investments in customer capital and pricing decisions. Using data on U.S. public companies together with IBES analysts' forecasts, we find that firms that just meet analysts' profit forecasts have an average markup growth of 0.8% higher than firms that just miss targets, suggesting opportunistic markup manipulation. To assess the aggregate economic implications of short-termism, we develop and estimate a quantitative firm-heterogeneity model that incorporates short-term frictions and endogenous markups resulting from customer accumulation. In the model, short-termism arises optimally to offset manager's private incentives, resulting in higher markups and lower customer capital stock. We find that, on average, firms increase markups by 8% due to short-termism, generating $38 millions of additional annual profits. At the macro level, the distortion reduces consumers' welfare by 4% and lowers the annual total market capitalization by $3.1 trillions on average.

Rigidity and Default in Production Networks

with Giacomo Como, Luca Damonte, Fabio Fagnani, Elisa Luciano, Alessandro Milazzo, Marco Scarsini

Presented at Boston College, Ca' Foscari Venice.

This paper studies the effects of production shocks, such as natural disasters, wars and pandemics, on production networks, taking into con- sideration firms’ reliance on external debt. We recognize that firms’ deci- sions on inputs are independent of the state of the world, or rigid. That may generate default when real shocks occur, even in equilibrium. Shock transmission is from the real to the financial sector. The occurrence of firms’ default just depends on the real shocks and the network structure, while the magnitude of the losses depends on the financial agreements. On the part of lenders, this separability doe not hold: both the frequency and the severity of default depend on the production network as well as on its relationship with lenders.

Work In Progress:

Brown vs Green Firms in Production Networks

with Giacomo Como, Luca Damonte, Fabio Fagnani, Elisa Luciano, Alessandro Milazzo, Marco Scarsini

Central Banks and the Wage-Price Spiral Conflict

with Michele Boldrin

Bank Risk Taking under Secular Stagnation

with J. Christina Wang

Importer's Dynamics and Buyer Market Power

with Marco Errico and Luigi Pollio