Working Papers:
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, Uppsala University, Bank of Italy, Crest 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.
Market Structure and the Pass-Through of Import Price Shocks
with Mathias Klein
Presented at Boston College, Sveriges Riksbank, Collegio Carlo Alberto.
This paper investigates how idiosyncratic import price shocks transmit to domestic prices, with a focus on the roles of firm heterogeneity, market structure, and data granularity in shaping pass-through dynamics. Using detailed monthly data from Swedish firms, we construct a network-adjusted measure of effective import prices that captures both direct and indirect exposure to international cost shocks. Our findings reveal that pass-through is substantial and gradual, approaching full transmission over a one-year horizon. We uncover an inverted U-shaped relationship between market share and pass-through, consistent with strategic interactions in pricing. Firms with intermediate market power pass through the largest share of cost shocks, while those with low or high market shares show attenuated responses. We also demonstrate that standard pass-through estimates relying on aggregate import price indices suffer from significant attenuation bias. These results underscore the importance of firm-level heterogeneity and production network linkages in understanding inflation dynamics. From a policy perspective, our findings suggest that accurate inflation assessment and effective stabilization require granular data and attention to firm behavior within concentrated and upstream industries.
The Propagation of Environmental Risk Through Production Networks
with Elisa Luciano
This paper examines how changes in sector-level CO2 emissions affect corporate borrowing costs. Using firm-level financial data from Compustat merged with EPA emissions data (2012-2023), we construct industry-level environmental growth rate. Panel regressions with firm and year fixed effects show that higher emissions are associated with increased interest rates, especially in carbon-intensive sectors. We interpret these findings through a theoretical production network model, where environmental shocks propagate via input linkages. Our results suggest that transition risks are priced into corporate debt markets, highlighting the financial relevance of climate exposure and the role of supply chain structure.
Work In Progress:
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