WP

In this paper, we study the impact of contractionary monetary policies on personal income inequality. By developing an Agent Based-Stock Flow Consistent model, we show that both the sign and magnitude of monetary policy impacts depend on the heterogeneity characterizing income sources across the population, the composition of households wealth and portfolio preferences, the value of the labor share, and the size of unemployment benefits. Monetary policy can affect inequality through four main transmission channels: saving remuneration, asset prices, aggregate demand and cost-push channels. The paper delivers five main results: i) the impact of monetary policy on income inequality is non-linear and is a function of the degree of symmetry in the distribution of firms and bank shares, markup, and unemployment benefits; ii) the magnitude of the impact is not independent of the inequality measure considered; iii) the short-run effects on wealth inequality due to capital gains and losses (CGL) on long-term bonds are positively correlated with the degree of heterogeneity in the portfolio preferences of households. In the long-run, such effect vanishes. The short-run effect is null in the case of zero heterogeneity; iv) If the monetary shock has an asymmetric impact on portfolio decisions, monetary policy can have a long-lasting impact on wealth inequality through the CGLs in the stock market. In the presence of symmetric shocks, CGLs in the stock market have no effect, neither in the short nor in the long term; v) the higher the labor share, the greater the impact of monetary policy on inequality. Finally, we adopt the income factor decomposition to disentangle how income heterogeneity affect the transmission channels of monetary policies.

We present a multi-country, multi-sector agent-based model that extends Dosi et al. (2019) and incorporates the exchange market and its interaction with the real economy. The exchange rate is influenced not only by trade flows but also by the heterogeneous demand for foreign currencies from financial traders. In this respect, the dual nature of the exchange rate is highlighted, acting both as a transmission channel of endogenous shocks and as a source of shocks. Indeed, differing beliefs bring about real-financial non-linear patterns with feedback mechanisms. Simulations show that the introduction of speculative sentiment behaviour reflects important stylised facts of bilateral exchange rate series. Furthermore, the findings indicate that trend-following behaviour substantially increases financial turbulence and contributes to real economic fluctuations. Finally, we highlight
the power and limitations of the central bank as an actor in the exchange rate market, showing that while the central bank’s interventions can effectively curb boom-bust cycles, their outcomes differ substantially.

Given the unobserved nature of expectations, this paper employs latent variable analysis to examine three financial instability models and assess their out-of-sample forecasting accuracy. We compare a benchmark linear random walk model, which implies exogenous instability phenomena, with a linear state-space model and a nonlinear Markov regime-switching model, both of which postulate endogenous fluctuations phenomena due to heterogeneous behavioral heuristics. Using the S&P 500 dataset from 1990 to 2019, results confirm complex endogenous dynamics and suggest that the inclusion of behavioral nonlinearities improves the model’s predictability both in the short, medium, and long run.

By building a simple discrete choice model, we study possible paths regarding country participation in international environmental agreements (IEAs) on climate change. Preferences for action are influenced by (i) the growth rate of emissions, (ii) participation of others in IEAs, and (iii) heterogeneous costs and preferences for action. We find a variety of outcomes depending on the relative strength of effects, where sustained high level of cooperation is just one possibility. More specifically, we find that a short run increase in climate action may be followed by a decline later, while non trivial dynamics that make the evolution less predictable are another possibility. Our results indicate that a reduction in global inequalities related to low carbon transition costs are a necessary condition for sustained high levels of cooperation.

We propose an empirical test to depict possible endogenous cycles within Heterogeneous Agent Models (HAMs). We consider a 2-type HAM into a standard small-scale dynamic asset pricing framework. On the one hand, fundamentalists base their expectations on the deviation of fundamental value from market price expecting a convergence between them. On the other hand, chartists, subject to self-fulling moods, consider the level of past prices and relate it to the fundamental value acting as contrarians. These pricing strategies, by their nature, cannot be directly observed but can cause the response of the observed data. For this reason, we consider the agents’ beliefs as unobserved state components from which, through a state space model formulation, the heterogeneity of fundamentalist-chartist trader cycles can be mathematically derived and empirically tested. The model is estimated using the S&P500 index, for the period 1990-2020 at different time scales, specifically, daily, monthly, and quarterly.

Using a database of more than 100,000 M&As, we study the internationalization of State-Owned Enterprises (SOEs) in the 21st century, and the underlying firm-level and country-level drivers. Meaningful differences are found – compared to private enterprises and across various types of SOEs as well – along many dimensions, including the time trend, the geographical-sectoral coverage, and firms’ proprietary structure. Majority-owned SOEs are more focused on domestic markets, while State-Invested Enterprises and government-backed financial institutions are more internationalized. SOEs’ internationalization has been less affected by the Great Financial Crisis, it is less sensitive to geographical and cultural proximity, it involves countries with a lower institutional quality and which are more peripheral in the world trade network.

Globalization has considerably increased the movement of people and goods around the world, which constitutes a key channel of viral infection. Increasingly close economic links between countries speeds up the transfer of goods and information, and the knock-on effect of economic crises, but also the transmission of diseases. Foreign direct investment (FDI), in particular, establishes clear ties between countries of origin and destination, and it is along these chains that contagious phenomena can unfold. In this paper, we investigate whether countries with more central positions in the global production network have higher COVID-19 infection and mortality rates. We merge data on EU-28 outward FDI with data on COVID-19 per capita infection and death rates to analyze their association with the topology of the FDI network. Our estimates reveal that countries most exposed to the COVID-19 outbreak are those characterized by a more central role in the global production network. This result is robust to the use of alternative measures of network centrality, and to the possible influence of the 2008 financial crisis on the structure of the global production network. We also find that exposure to the pandemic increases with the centrality of a country in the FDI network of certain industries, including business machinery and equipment, business services, real estate, tourism and transport.

Starting from the premise that productivity is heterogeneous across firms, Melitz (2003) explains why individual productivity is key in determining the capability of a firm to export. In this paper we build a model along Melitz’s lines to show that also financial capacity, captured by the level of individual net worth, affects the behaviour of firms on international markets. We show that firms with low productivity may still be able to penetrate foreign markets provided they have enough net worth to incur the cost of exporting. In this setting, we explore the effects of changes in transport costs, fixed costs for exporters and of financial constraints.

Matching and merging different databases, we study how firm’s productivity is affected by individual characteristics and provincial context conditions in Italy. Mainly, we focus on the relation between social capital, in its different forms and dimensions and calculated at provincial level and firms’ productivity, calculated using the non-parametric DEA approach. We find that exporting, self-financing firms, and firms belonging to groups, are more productive. In particular, Cooperative firms are more productive than limited company. Moreover, the variables capturing the social capital show strong positive correlation with firms’ productivity, indicating that a widespread civism intended as pro-social behavior independent of specific interpersonal bounds, seems to create an economic environment which is more favorable to entrepreneurship and collaboration among firms, since it increases interpersonal trust, lowers transaction costs, enhances the compliance of formal or informal rules of fairness and fosters a more transparent, impartial and efficient working of the public administration.

This paper attempts to highlight the shortcomings in the application of the Exchange Market Pressure index, developed by Eichengreen et al. [1994], to the study of currency crises in developing countries. The main innovation of this index relies on its ability to signal those pressures on a currency that are softened or warded off through monetary authorities’ interventions, thus avoiding a bias in the selection of crisis episodes due to the missing observation of unsuccessful speculative attacks, as it would happen if the selection rested merely on nominal exchange rate movements. Different kinds of problems in adopting this index have been detected. First, we discuss the statistical issues that arise with the use of an index with a multi-dimensional informational basis. We point out how arbitrary, and often hidden, choices are required to aggregate the information conveyed by the three components of the index. Then, we highlight the ad hoc assumptions introduced to build a binary crisis variable that is based on the EMP. In an attempt to tackle the problems to which the indirect use of the EMP gives rise to, we propose a different rule for the identification of crisis episodes. The proposed crisis identification rule retains the spatial relativity introduced by Eichengreen et al. [1994], but it differentiates from their definition as it is also characterized by temporal relativity and by the independence of the identification of past observations from future values of the index. In a preliminary attempt to show how methodological choices do matter and are able to affect the econometric analysis on currency crises determinants, we finally employ data from a sample of 26 countries – that comprises both developed and emerging economies – to test the sensitivity of the EMP index and of the crisis indicator with respect to issues that we are raised in this paper.

Nel presente lavoro abbiamo costruito un modello di determinazione del tasso di cambio in presenza di agenti eterogenei (Banca Centrale, Investitori e Market Makers). Ampie fluttuazioni del tasso di cambio sono il risultato di dinamica endogena, in particolare scaturiscono dall’interazione della Banca Centrale, che interviene per stabilizzare il cambio intorno ad un livello obiettivo, e gli investitori-chartisti che guardano al differenziale fra il tasso di interesse interno ed estero. Per completare il modello, si è effettuato uno studio specifico assumendo che il comportamento degli agenti sia rappresentato da una funzione sigmoidale.