CEF.UP – ECO Seminar

Tuesday – February 18^th, 2025, at 1:00 p.m. | Room 305| Online

“The Political Economy of Domestic and External Sovereign Debt“

Almuth Scholl –  University of Konstanz (Germany)

Abstract:

“This paper explores the political and distributional consequences of sovereign debt and default taking into account that a sizable share of public debt is held by domestic creditors. We develop a quantitative macroeconomic model in which heterogeneous households face idiosyncratic income risk and save in non-state-contingent government bonds. Debt contracts are not enforceable and the government is politically constrained in its policy choices: A fiscal plan is required to receive the support of the majority of households. If neither fiscal plan is approved, the government has to default and to restructure domestic and external debt. Debt crises are characterized by a political conflict. In the course of a crisis, rising debt service costs force the government to cut redistributive spending. While wealthy households benefit from high interest rates on their savings, poor households support a default. Consequently, the approval of the fiscal plan decreases and the likelihood of a political default rises. Political constraints generate sizable welfare costs highlighting that individuals do not internalize the impact of their voting on interest rates and redistributive spending in equilibrium.”

CEF.UP – ECO Seminar

Friday – February 7^th 2025, at 13:00h | Room 305

Lost in Transition: Financial Barriers to Green Growth

Antonin Bergeaud – HEC Paris (France), CEPR (England, United Kingdom) and Centre for Economic Performance at LSE (England, United Kingdom)

Abstract:

“Green innovation offers a solution to climate change without compromising living standards. Yet the share of climate-enhancing innovations in total patents, after booming for two decades, has seized to grow since the Global Financial Crisis. We develop a quantitative framework in which firms direct innovation towards green or polluting technologies, and become better at innovating in technologies that they have previously succeeded in. This causes mature, incumbent firms to predominantly innovate in polluting technologies. When green technologies become more attractive, e.g. due to a carbon tax, young firms are responsible for a large share of the transition to green innovation. As young firms are financially constrained, a credit shock harms their innovation, bringing the green transition to a halt. We validate the theory with two empirical exercises. First, we use micro data to provide causal evidence that tight credit disproportionately affects green innovation, through its effect onyoungfirms. Second,weshowthatcontractionarymonetarypolicyshockshaveasignificantly larger effect on green patenting than non-green patenting, in line with the model. Quantifying the model, we find that tight credit can explain around 60% of the recent slowdown in the rise of green patenting. This translates to a cumulative increase in emissions by half a year of the initial (high pollution) steady state.”

CEF.UP – ECO Seminar

Tuesday – January 21^st, 2025, at 13:00h | Room 305

“Returns Heterogeneity and Consumption Inequality Over the Life Cycle“

Claudio Daminato –  Lund University (Sweden)

Abstract:
“A recent literature argues that persistent heterogeneity in wealth returns (“type dependence”) as well as a positive association with wealth levels (“scale dependence”) play an important role for explaining features of the wealth distribution, especially its extreme concentration at the top. In contrast, traditional models of wealth accumulation emphasize the role of persistent differences in labor earnings. Using panel data from the PSID, we first document that a common unobserved component (which we interpret as the endowment of cognitive and non-cognitive skills of an individual) drives persistent heterogeneity in both wealth returns and labor earnings. We embed these features of the joint wealth return-earnings process in a life-cycle model of consumer behavior and show that ignoring them would dramatically understate average returns for people at the top of the wealth distribution as well as the level and rise of consumption inequality over the life cycle.”

CEF.UP – ECO Seminar

Friday – December 20^th 2024, at 13:00h | Room 305

Monetary Policy, Information and Country Risk Shocks in the Euro Area

Giovanni Ricco – University of Warwick (England, United Kingdom) and CREST – École Polytechnique (France)

Abstract:

“This study examines high-frequency market responses to ECB policy announcements, providing instrumental variables to identify four types of monetary policy shocks — conventional policy, forward guidance, quantitative easing/tightening, and asymmetric country risk — along with information shocks. Our findings show that non-linear information effects, especially prominent during episodes of acute market stress in euro area crises, are key to resolving puzzles in macroeconomic and financial variable responses reported in studies using high-frequency European data. The IVs obtained by controlling for these effects yield, in a VAR model, dynamic responses to monetary tightenings with contractionary impacts on output and prices.”

CEF.UP – ECO Seminar

Friday – December 6^th 2024, at 13:00h | Room 305

Flight to Safety and New Keynesian Demand Recessions

Sebastian Merkel –  School of Economics, University of Bristol (England, United Kingdom)

Abstract:

“This paper builds a tractable New Keynesian model with idiosyncratic risk, incomplete markets, and nominal safe assets to study the transmission of uncertainty shocks through investors’ portfolio decisions and how monetary-fiscal policy can stabilize fluctuations in the demand for safe assets. A sudden increase in uncertainty triggers a flight to safety: investors reallocate portfolios from productive assets to safe assets. When prices are sticky, the real value of nominal safe assets cannot flexibly adjust. Instead, the flight to safety gives rise to aggregate demand recessions and overshooting in capital price adjustments. Conventional monetary policy that operates through interest rate changes alone has limited power in influencing household portfolios. Instead, fiscal policy plays a crucial role in price stabilization and optimal policy.”

CEF.UP – ECO Seminar/Webinar

Friday – October 11^th, 2025, at 1:00 p.m. | Room 305| Online

“Not Incentivized Yet Efficient: Working From Home in the Public Sector”

Tom Kirchmaier –  LSE, London School of Economics (England, United Kingdom)

Abstract:

“This paper studies whether working from home (WFH) affects workers’ performance in public sector jobs. Studying public sector initiatives allows us to establish baseline estimates on the impact of WFH net of incentives. Exploiting novel administrative data and plausibly exogenous variation in work location, we find that WFH increases productivity by 12%. These productivity gains are primarily driven by reduced distractions. They are not explained by differences in quality, shift length, or task allocation. The productivity gains more than double when tasks are assigned by the supervisor.”

CEF.UP – ECO Seminar/Webinar

Tuesday – September 24^th, 2024, at 1:00 p.m. | Room 305| Online

“Consumption, Wealth, and Income Inequality: A Tale of Tails“

Christian Hellwig –  Toulouse School of Economics (France), CEPR – Center for Economic Policy Research (E.U.)

Abstract:

“We provide evidence that the distributions of consumption, labor income, wealth, and capital income exhibit asymptotic power-law behavior with a strict ranking of upper tail inequality, in that order, from the least to the most unequal. We show analytically and quantitatively that the canonical heterogeneous-agent model cannot replicate the proper ranking and magnitudes of these four tails simultaneously. Mechanisms addressing the wealth concentration puzzle in these models through return heterogeneity lead to a mirror consumption concentration puzzle. We match the cross-sectional data on these four Pareto tails by positing a combination of non-homothetic, wealth-dependent preferences and scale-dependent returns to capital. We underscore the importance of these results by showing that all four dimensions of top inequality jointly determine the long-run elasticity that governs the revenue-maximizing capital tax rate.”

CEF.UP – ECO Seminar/Webinar

Tuesday – June 4^th, 2024, at 1:00 p.m. | Room 305| Online

“Uncertainty shocks in monetary unions: The case for a nominal anchor”

Benjamin Born  –  Frankfurt School of Finance & Management (Germany)

Abstract:

“Uncertainty shocks contract economic activity and arguably more so if monetary policy cannot cushion their effect. Yet, as we employ a Bayesian VAR model to identify and contrast the effects of country-specific and common uncertainty shocks on the countries in the euro area, we find that countryspecific shocks have milder effects—even though they are not accommodated by monetary policy. We rationalize this result in a two-country model of a monetary union and find that union membership provides a nominal anchor for the price level, thereby dampening the “markup channel” through which the adverse effects of uncertainty shocks unfold.”

CEF.UP – ECO Seminar/Webinar

Tuesday – May 28^th, 2024, at 1:00 p.m. | Room 305| Online

“Optimal Redistribution with Government Debt“ (with Kirill Shaknov)

Facundo Piguillem  –  Einaudi Institute for Economics and Finance (Italy)

Abstract:

“We analyze the tight relationship between government debt, redistribution and capital taxation in Overlapping Generations Economies (OLG). We do so in an heterogeneous agents economy where the government collects capital and progressive labor taxes to pay government spending, debt and redistribute income. In this environment, the Ramsey planner uses all taxes, even in the long run. We show that rising inequality leads not only to more progressivity, but also to more government debt and capital taxation. The necessary increase in debt to achieve the optimal redistribution policy can be substantial. We explore how limits to government’s borrowing choices severely restrict its ability to redistribute income. We calibrate the model to the U.S. in the 2000-10 decade and estimate the optimal response to the observed change in inequality. We find the optimal level of debt should approximately doubled.”

CEF.UP – ECO/FIN Seminar/Webinar

Thursday – May 23^rd, 2024 at 1:00 p.m. | Room 305| Online

Bank Specialization in Lending to New Firms

Diana Bonfim– Banco de Portugal and European Central Bank

Abstract:

“We formulate a novel dimension of bank-lending specialization—specialization in lending to new firms—and investigate its impact on the creation, credit access, and survival of new businesses. We exploit a Portuguese reform that drastically reduced the red tape of starting a new firm and that was rolled out in a staggered manner across municipalities. We show that while reducing regulatory barriers stimulates business creation, this effect depends crucially on the pre-reform local presence of bank branches specialized in lending to new firms. A greater presence of such branches is associated with improved credit access and higher leverage of new local businesses. Moreover, new firms that obtain loans from specialized branches exhibit an up to 12 percent higher survival rate.”

CEF.UP – ECO Seminar/Webinar

Tuesday – April 9^th, 2024, at 1:00 p.m. | Room 305| Online

“A Temporary VAT Cut in Three Acts: Announcement, Implementation, and Reversal” (joint work with Tiago Bernardino, Ricardo Duque Gabriel e Márcia Silva-Pereira)

João Nuno Quelhas   –  Banco de Portugal

Abstract:

“We investigate the pass-through of a Value-Added Tax (VAT) decrease to consumer prices, using Portugal’s temporary cut in VAT for a subset of food items in 2023 as a laboratory. Exploiting a novel high-frequency dataset of online retail prices, we use an event study approach to analyze price dynamics across the complete policy lifetime. We find that prices rose by around 1% upon announcement, that the pass-through was almost complete when the policy was implemented, and around 70% at the reversal. The reduction in prices persisted high over the entire duration of the policy. We estimate that the policy decreased month-on-month inflation by 0.7 percentage points. We also find evidence of deflation in producer prices which could be a potential mechanism driving the high pass-through.”

CEF.UP – ECO Seminar/Webinar

Friday – March 1^st, 2024, at 1:00 p.m. | Room 305| Online

“The Transmission of Foreign Demand Shocks”

Jeppe Druedahl  –  University of Copenhagen (Denmark)

Abstract:

“Introducing heterogeneous households into a New Keynesian model of a small open economy enables the model to fit a set of stylized empirical facts about the transmission of foreign demand shocks. In the absence of a strong labor income effect on consumption, the model counterfactually implies that domestic consumption decreases as the central bank raises the interest rate to curb domestic inflation. With plausible marginal propensities to consume, the model instead produces the observed increase in domestic consumption of both tradeable and non-tradeable goods. This implies that foreign demand shocks are more important for international business-cycle comovement than predicted by existing models. Our findings also have implications for stabilization policies: While monetary policy is well-suited to counteract foreign demand shocks, traditional fiscal policies are inadequate, as they do not provide sufficient stimulus to the tradeable sector. This poses a particular challenge for countries with a fixed exchange rate or in a monetary union.”