Luca Gambetti

The Structural Dynamics of Output Growth and Inflation: Some International Evidence

We examine the dynamics of output growth and inflation in the US, Euro area and UK using a structural time varying coefficient VAR. There are important similarities in structural inflation dynamics across countries; output growth dynamics differ. Swings in the magnitude of inflation and output growth volatilities and persistences are accounted for by a combination of three structural shocks. Changes over time in the structure of the economy are limited and permanent variations largely absent. Changes in the volatilities of structural shocks matter.

No News in Business Cycles

This paper uses a structural, large dimensional factor model to evaluate the role of ‘news’ shocks (shocks with a delayed eect on productivity) in generating the business cycle.

Business Cycle Fluctuations and the Distribution of Consumption

This paper sheds new light on the interactions between business cycles and the consumption distribution. We use CEX consumption data and a factor model to characterize the cyclical dynamics of the consumption distribution. We first establish that our approach is able to closely match business cycle fluctuations of consumption from the National Account. We then study the responses of the consumption distribution to TFP shocks and economic policy uncertainty shocks. Importantly, we find that the responses of the right tail of the consumption distribution, mostly comprising higher educated individuals, to shocks that drive cyclical fluctuations are larger and quicker than in other parts of the distribution. We note that the cost of business cycle fluctuations is larger than the one found using aggregate consumption, and that the shocks we analyze reduce consumption inequality on impact.

The Macroeconomic Impact of the ECB's Expanded Asset Purchase Programme (APP)

This paper provides empirical evidence on the macroeconomic impact of the expanded asset purchase programme APP) announced by the European Central Bank (ECB) in January 2015. The shock associated to the APP is identified with a combination of sign, timing and magnitude restrictions in the context of an estimated time-varying parameter VAR model with stochastic volatility. The evidence suggests that the APP had a significant upward effect on both real GDP and HICP inflation in the euro area during the first two years. The effect on real GDP appears to be stronger in the short term, while that on HICP inflation seems more marked in the medium term. Moreover, several channels of transmission appear to have been activated, including the portfolio rebalancing channel, the exchange rate channel, the inflation re-anchoring channel and the credit channel. JEL Classification: C32, E44, E52, E58

Does Inflation Targeting Matter for Output and Inflation Volatility? A Conditional Analysis

We address this question by examining the conditional dynamics of inflation and output growth in response to markup shocks for 14 industrialized countries. Markup shocks create a trade-off between output gap and inflation stabilization purposes, and the theory predicts that conditional on such shocks output growth should be more volatile than inflation in inflation targeting countries. Data suggest no differences between targeting and non-targeting countries in the post 1990s. Moreover, we document a similar increase in the conditional relative variability of output growth after the adoption of inflation targeting for both groups of countries. We argue that changes in the conduct of monetary policy can explain this pattern.