Luca Fornaro
London School of Economics and Political Science
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Publication
Featured researches published by Luca Fornaro.
Journal of International Money and Finance | 2015
Gianluca Benigno; Nathan Converse; Luca Fornaro
This paper describes the stylized facts characterizing periods of exceptionally large capital inflows in a sample of 70 middle- and high-income countries over the last 35 years. We identify 155 episodes of large capital inflows and find that these events are typically accompanied by an economic boom and followed by a slump. Moreover, during episodes of large capital inflows capital and labor shift out of the manufacturing sector, especially if the inflows begin during a period of low international interest rates. However, accumulating reserves during the period in which capital inflows are unusually large appears to limit the extent of labor reallocation. Larger credit booms and capital inflows during the episodes we identify increase the probability of a sudden stop occurring during or immediately after the episode. In addition, the severity of the post-inflows recession is significantly related to the extent of labor reallocation during the boom, with a stronger shift of labor out of manufacturing during the inflows episode associated with a sharper contraction in the aftermath of the episode.
The Scandinavian Journal of Economics | 2014
Gianluca Benigno; Luca Fornaro
This paper presents a model of financial resource curse, i.e. episodes of abundant access to foreign capital coupled with weak productivity growth. We study a two-sector, tradable and non-tradable, small open economy. The tradable sector is the engine of growth, and productivity growth is increasing in the amount of labor employed by firms in the tradable sector. A period of large capital inflows, triggered by a fall in the interest rate, is associated with a consumption boom. While the increase in tradable consumption is financed through foreign borrowing, the increase in non-tradable consumption requires a shift of productive resources toward the non-tradable sector at the expenses of the tradable sector. The result is stagnant productivity growth. We show that capital controls can be welfare-enhancing and can be used as a second best policy tool to mitigate the misallocation of resources during an episode of financial resource curse.
LSE Research Online Documents on Economics | 2012
Gianluca Benigno; Luca Fornaro
Journal of the European Economic Association | 2018
Luca Fornaro
2012 Meeting Papers | 2014
Luca Fornaro
Journal of International Economics | 2015
Luca Fornaro
Archive | 2014
Gianluca Benigno; Nathan Converse; Luca Fornaro
Social Science Research Network | 2016
Vladimir Asriyan; Luca Fornaro; Alberto Martin; Jaume Ventura
2017 Meeting Papers | 2017
Luca Fornaro
LSE Research Online Documents on Economics | 2015
Gianluca Benigno; Nathan Converse; Luca Fornaro