Research

Publications

• LESS is MORE: Consumer Spending and the Size of Economic Stimulus Payments. With Paolo Surico. 2026. CEPR DP No. 15918. VoxEU Column American Economic Journal: Macroeconomics Vol. 18, No. 1, January 2026, pages 34–68
  Abstract

  We study the consumption response to unexpected transitory income gains of different size, using hypothetical questions from the Italian Survey of Household Income and Wealth. Families with low cash-on-hand display a higher Marginal Propensity to Consume (MPC) out of the small gains while affluent households exhibit a higher MPC out of the large gains. The spending behaviour of low-income families is consistent with the predictions of models with borrowing constraints and uninsurable income risk whereas the consumption pattern of higher earners can be accounted for by non-homothetic preferences on non-essentials. Our results suggest that, for a given level of public spending, a fiscal transfer of smaller size paid to a larger group of low-income households stimulates aggregate consumption more than a larger transfer paid to a smaller group.
• Fiscal Consequences of Missing an Inflation Target. With Hélène Rey 2024. NBER WP No. 30819. IMF Economic Review, vol. 72(2), pages 701-772, June.
  Abstract

  The European Central Bank is unique in setting monetary policy for several sovereign states with heterogeneous debt levels and different maturity structures. The monetary-fiscal nexus is central to the functioning of the euro area. We focus on one particular aspect of that nexus, the effect of the reliability of the European Central Bank monetary policy on public finances. We show that when the ECB misses its inflation target this has large heterogeneous fiscal consequences for Euro Area countries.

Working Papers

• Monetary Policy and the Maturity Structure of Public Debt. 2023. SSRN. Online Appendices
  Abstract

  This paper studies the mediating impact of the maturity of public debt in the transmission of monetary policy shocks to economic activity. A longer debt maturity attenuates greatly the effect of monetary policy: going from the average historical duration of US debt to very short term debt doubles the impact of a rise of the policy rate on output. A similar result holds in UK data. Using data on corporate debt, spreads, investment, and fiscal variables, I show that these effects can be traced back to a quantitatively important financing channel. A model featuring an interaction between an empirically estimated primary market friction and a standard financial accelerator is able to account for these facts.
• Non-Essential Business Cycles. 2025. With Natalie Rickard and Paolo Surico. CEPR DP No. 19773. VoxEU Column Online Appendices. Recipient of a research grant by the Wheeler Institute. Revise and Resubmit at The Review of Economic Studies
  Abstract

  This paper documents three main regularities on post-WWII data for the United States: (i) spending on non-essentials is more sensitive to the business-cycle than spending on essentials; (ii) earnings in non-essential sectors are more cyclical than earnings in essential sectors; (iii) non-essential industries employ a larger share of hand-to-mouth workers. We develop and estimate a two-sector New-Keynesian model with non-homothetic preferences, hand-to-mouth workers and sectoral labour force heterogeneity that is consistent with these findings. We use the model to revisit the transmission of stabilisation policies. A main finding is that the interaction of cyclical product demand composition and cyclical labour demand composition greatly amplifies the effects of monetary policy, which in our economy can be equivalently implemented by a mix of consumption and labour taxes. However, a VAT change applied only to non-essentials (only to essentials) has a far larger (smaller) impact than a uniform VAT change of the same size.

  Media coverage: JP Morgan Private Bank Insights

• Discretionary Spending is the Cycle, and Why it Matters for Monetary Policy. 2025. With Natalie Rickard, Paolo Surico, and Chiara Vergeat.
  Abstract

  This paper develops a novel framework for business-cycle analysis in the Euro-area based on the distinction between necessity and discretionary spending as well as their associated industries. We apply our approach to quantify the heterogeneous effects of monetary policy, uncovering significant new regularities. Consumer spending, employment, corporate profits, stock returns and dividend payments exhibit greater cyclicality and greater sensitivity to monetary policy in discretionary industries, while prices respond more in sectors producing necessities. Wages, however, display limited sectoral asymmetry. Discretionary industries are characterized by a substantially higher concentration of hand-to-mouth workers, particularly among lower earners. Only consumer prices in necessity sectors are a significant leading indicator for GDP, whereas only employment rates in discretionary industries help predict HICP inflation. We show that a calibrated theoretical model with spending heterogeneity and labour market heterogeneity is consistent with these findings. We use the model to revisit the design of optimal monetary policy. We find that the European Central Bank can improve welfare by responding mostly to inflation in discretionary spending; doing so mitigates the adverse effects of recessions on hand-to-mouth workers and thus stabilizes aggregate demand and headline inflation more effectively.

  Media coverage: Reuters, Expresso, Central Banking, Coindoo, Eco, AInvest

• Government Bonds Supply Shocks. 2026. SSRN.
  Abstract

  This paper studies the impact of government bond supply news shocks on debt prices. I exploit an institutional feature in the UK fiscal policy framework and high frequency identification to estimate the effect of a large government bond increase, which is not due to news about the fiscal deficit and total debt. The identification is based upon the price changes of futures on gilts around news published by the UK Debt Management Office in general and especially just after the budget speeches of the Chancellor of the Exchequer. While these speeches discuss fiscal policy and overall debt forecasts, they do not disclose the exact supply of government bonds. I find that a 1 percentage point increase in government bonds increases interest rates on a 10-year government bond by 9 basis points and the corporate bond risk spread by 2 basis points. My results are consistent with the preferred habitat theory of interest rates where constrained arbitrageurs arbitrage across both government and corporate debt markets. The paper suggests that fiscal policy transmits also through direct crowding-out in debt markets.

Pre-PhD Working Papers

• Investing in Electricity, Growth, and Debt Sustainability: The Case of Lesotho. With Aidar Abdychev. 2016. International Monetary Fund Working Paper No.16/115.
  Abstract

  This paper analyses a large public investment in a construction of a hydropower plant in Lesotho and its implications on the growth and debt sustainability. The paper employs an open economy dynamic general equilibrium model to assess the benefits of a large public investment through growth-enhancing increase in domestic energy supply and receipts from selling electricity abroad to ease the fiscal burden, which is often associated with big investment projects. During the transition (construction stage), various financing options are explored: increase in the public debt, increase in domestic revenue (fiscal adjustment), and combination. The calibration matches Lesotho's data and it captures the project's main challenges regarding the project costs. Moreover,the key remaining issue is the agreement with South Africa to purchase sufficient amount of electricity to allow the potential plant to run at a high capacity. We find that, the project can lead to sizable macroeconomic benefits as long as costs are relatively low and demand from South Africa is sufficiently high. However, the risks for the viability of the project are high, if these assumptions are violated.
• Macroeconomic Dimensions of Public-Private Partnerships. With Edward F. Buffie, Bin Grace Li, and Luis-Felipe Zanna. 2016. International Monetary Fund Working Paper No. 16/78.
  Abstract

  The voluminous literature comparing public-private partnerships (P3s) and own-investment (OI) by the public sector is dominated by contributions from microeconomic theory. This paper gives macroeconomics a voice in the debate by investigating the repercussions of P3 vs. OI in a dynamic general equilibrium model featuring private capital accumulation and involuntary unemployment with efficiency wages. Typically P3s cost more but produce higher-quality infrastructure and boast a better on-time completion record than OI; consequently, they are comparatively more effective in reducing underinvestment in private capital, underinvestment in infrastructure, unemployment and poverty. The asymmetric impact on macro externalities raises the social return in the P3 2 - 9 percentage points relative to the social return to OI, depending on whether the externalities operate singly or in combination and on whether P3 enjoys an advantage in speed of construction.

Other Publication

• Hidden Value. With Edward F. Buffie, Bin Grace Li, and Luis-Felipe Zanna. Finance and Development, September 2016, Vol. 53, No. 3