Research

Trade Fragmentation, Currency Unions and the Role of Fiscal Transfers

Abstract. A common trade shock can affect members of a currency union differently, while monetary policy cannot respond separately to country-specific conditions. This paper studies whether cross-country fiscal transfers can substitute for this missing adjustment margin. I develop a dynamic quantitative trade model with nominal rigidities and heterogeneous households embedded in a currency union with fiscal redistribution across member states. I apply the model to the 2025 U.S. tariff shock in the euro area and show that simple transfer rules can offset all of the additional distortions generated by the loss of country-specific monetary policy. I further show that the effectiveness of transfers depends not only on household consumption responses but also on where the induced expenditure is directed. Motivated by this mechanism, I propose a fiscal rule that directs more resources toward countries more exposed to the shock, with higher marginal propensities to consume and greater domestic absorption, while placing less weight on countries with stronger trade linkages outside the union. For a given amount of fiscal redistribution, this rule reduces labor-market distortions more. Finally, I show that euro-area retaliation combined with a transfer scheme would have further mitigated the labor-market effects of the U.S. tariff shock within the currency union.

[Working Paper]  [Summary Slides]

Committee: Natalia Ramondo, Masao Fukui, Joaquin Blaum, and David Lagakos.

Working Paper

The welfare implications of the China Shock across US States and Skill Groups 

Abstract. I build a dynamic quantitative spatial trade model with firm and worker heterogeneity, mobility frictions, and short-run unemployment to quantify the regional and distributional effects of the China Shock across U.S. states. The baseline model implies an average welfare gain (0.1%) but substantial heterogeneity across skill groups. Average welfare gains are 0.01% for unskilled workers —who lose in 17 of 50 states—versus 0.31% for skilled workers, who lose in only 7 states. The model predicts an average increase of 0.78% in the skill premium, with more exposed states experiencing larger increases. Finally, I find long-run gains in every state for both types of workers. 

[SSRN Working Paper]

Mind the app: do European deposits react to digitalisation? , with Nadya Wildmann , Beatrice Scheubel , Livio Stracca , Francesco Asvisio and Luisa Fascione . 

Abstract. The March 2023 banking turmoil has intensified discussions whether social media and the digitalisation of finance have become significant factors in driving severe deposit outflows. We introduce the concept of deposits-at-risk and utilize quantile regressions for disentangling determinants of stressed outflows at the lowest tail of the distribution. For a sample of large banks directly supervised by the ECB, our findings indicate that an increased use of online banking services leads to a small amplification of extreme deposit outflows, but this effect is not further exacerbated by the availability of a mobile banking app. Online banking use and availability of a mobile app do not have a causal effect on deposit volatility in normal times. Finally, social media are impactful only in idiosyncratic cases. 

[ECB Working Paper]

Technology Diffusion at the Top, Firm-to-Firm Technology Transfers and the Welfare Gains from Openness. Second Year Paper, Boston University, 2023.

Abstract. I develop a static model to study the macroeconomic effect of multinational production (MP) and trade in the context of technology diffusion among the best firms in the sector and simultaneous firm-to-firm technology transfers between sectors. I show the importance of separately calibrating aggregate spillovers and firm-to-firm technology transfers in the buyer-supplier linkages. I focus my analysis on non-tradable suppliers, and show how different levels of technology transfer affect the gains from openness.

[Working Paper]

Work in progress