Financial and Fiscal Interaction in the Euro Area Crisis: This Time was Different (with Lucrezia Reichlin and Giovanni Ricco), European Economic Review, Volume 119, Pages 333-355, October 2019 (Download paper or the working paper version here).
Macroeconomic News and Market Reaction: Surprise Indexes meet Nowcasting, International Journal of Forecasting, Volume 35, Issue 4, October–December 2019, Pages 1725-1734. Download paper or the Working Paper version here and here.
We analyse the predictive ability of real-time macroeconomic information for the yield curve of interest rates. We specify a mixed-frequency macro-yields model in real-time that incorporates interest rate surveys and that treats macroeconomic factors as unobservable components. Results indicate that real-time macroeconomic information is helpful to predict interest rates, and that data revisions drive a superior predictive ability of revised macro data over real-time macro data. Moreover, we find that incorporating interest rate surveys in the model can significantly improve its predictive ability.
The Impact of Macroeconomic News on the Euro-Dollar Exchange Rate, Working Papers ECARES, Universite Libre de Bruxelles, September 2016. Download paper
This paper studies the effect of macroeconomic "news" (market now-cast errors related to the flow of data releases on macroeconomic fundamentals) on the daily USD/EUR exchange rate. I consider a large number of real-time macroeconomic announcements from both the US and the euro-zone, and the related market expectations as reported by Bloomberg. For the euro-zone I also study country level announcements for the four biggest economies (Germany, France, Italy, Spain). The results for the whole sample (1999-2012) show that both the "news" associated with euro-zone releases and those associated with US ones have a significant impact on the USD/EUR exchange rate. However, the effect of the euro-zone "news" has become larger since the 2008 crisis and it is now more sizeable than that of the US "news".
The Legacy Debt and the Joint Path of Public Deficit and Debt in the Euro Area (with Lucrezia Reichlin and Giovanni Ricco), European Commission ECFIN Fellowship Initiative 2014-2015, September 2015. Download paper
This paper studies the joint dynamics of public debt and public deficit in the euro area for the period 1981-2013 and computes projections up to 2020. We show that, since 2009, public debt and public deficit have been negatively related. On the basis of a counter-factual simulation that conditions on past correlations with a large number of macroeconomic indicators and the observed GDP path since 2008 we find that the negative relation is anomalous with respect to previous historical experience. In contrast, private savings and private debt since 2008 have behaved in line with past experience. We define and estimate the “legacy debt” of the 2008 crisis and show that, if GDP and inflation will behave according to the International Monetary Fund (IMF) projection, by 2020 it will still account for 15% of total public debt.