'NEWS UNCERTAINTY IN BREXIT UK' with Renato Faccini - AMERICAN ECONOMIC REVIEW: INSIGHTS

Click here to view full paper. 

​

After the Brexit referendum, the behavior of the UK economy defied widespread expectations, as it did not exhibit a V-shaped recession but a slow decline in production. We show that this pattern of propagation arises when uncertainty is about future, rather than current, fundamentals and if the expected duration of uncertainty is sufficiently long. We reach this conclusion within the confines of a heterogeneous firms model featuring news uncertainty rather than conventional uncertainty shocks. In the quantitative analysis, uncertainty is informed by firm-level probability distributions on the expected effect of Brexit on sales.

'UNCERTAINTY, INTANGIBLE CAPITAL & PRODUCTIVITY DYNAMICS' [Job Market Paper]

Click here to view full paper.

Non-Technical Summary

Following an unparalleled rise in uncertainty over the Great Recession, the US economy has been experiencing anaemic productivity growth. This paper offers a quantitative study on the link between uncertainty and low productivity growth. Firstly, using micro-level data I show that uncertainty accounts for half of the drop in intangible capital stock during the Great Recession. Secondly, to investigate the effect of uncertainty on productivity growth dynamics, I present a novel general equilibrium endogenous growth model with heterogeneous firms that undertake intangible capital investment subject to non-convex costs and time-varying uncertainty. I show that uncertainty can generate slow recoveries and a persistent slowdown in productivity growth when accounting for the empirical discrepancy between the realised and expected changes to the second-moment of fundamentals.

​

'UNCONVENTIONAL MONETARY POLICY, LEVERAGE & DEFAULT DYNAMICS'

Click here to view full paper.

The objective of this paper to investigate the effectiveness of credit easing policy in mitigating the economic fallout from a financial recession using a model that can account for the observed default and leverage dynamics during the financial crisis of 2007. A general equilibrium model is developed with a financial sector and endogenous asset defaults able to account for the observed default and leverage dynamics. Following an adverse aggregate shock, banks deleverage through two channels: (i) higher non-performing loans provisions, and (ii) lower the marginal return of assets. Credit policy is modelled as an expansion of the central bank’s balance sheet countering the disruption in private financial intermediation. Unconventional monetary policy, namely credit easing policy, is shown to be ineffective in mitigating the effects of a financial crisis due to its crowding-out effect on the private asset market. Other non-monetary policy tools such as credit subsidies and their efficacy considered.

​

​

Royal Economic Society Conference 2019

University of Warwick

Royal Economic Society Conference 2018

University of Sussex

EEA-ESEM 2017​

ISCTE – University Institute of Lisbon

​

EEA-ESEM 2018

University of Cologne