Peer-reviewed Publications

European Economic Review, Volume 156, July 2023

Special Issue: the COVID-shock and the new macroeconomic landscape: taking stock and looking ahead

[This project is part of the Epidemic-Macro Model Data Base (Epi-MMB)]

Abstract: Asymmetric effects across sectors are the distinctive features of the Covid-19 shock. An Epidemiological-Industry Dynamic model with heterogeneous firms and endogenous firms dynamics mimics the deep recession suffered by sectors characterized by high exposure, the reallocation of entry and exit opportunities across sectors, and the dynamics of aggregate productivity during the first wave of the pandemic. The cleansing effect induced by the Covid19 crisis is sector-specific. Monetary policy and sticky wages are central ingredients to capture reallocation effects. Social distancing, by smoothing out cleansing in the social sector, slows down the reallocation process and prolongs the recession, but saves lives.

European Economic Review, Volume 142, February 2022

Abstract: We describe a new channel through which monetary policy affects productivity at business cycle frequencies. An unexpected monetary easing initially reduces average labor productivity, which then overshoots its pre-shock level. At the same time, the firm entry rate rises in response to the shock and then undershoots. Market concentration amplifies the effect on productivity and dampens that on entry. To rationalize these empirical findings, we build a New Keynesian model where the pool of heterogeneous producers is endogenous. By reducing borrowing costs, a monetary easing attracts low productivity firms to the market, inducing a reduction in average productivity. The resulting increase in competition cleanses the market of low productivity firms, leading to a productivity overshooting together with an undershooting of the entry rate. Market concentration affects the nature of new entrants, and alters the transmission of the shock.

Non-refereed Publications

Business Dynamism, Sectoral Reallocation and Productivity in a Pandemic, December 2021, SUERF Policy Brief No 238