Riccardo Trezzi

Are Commodity Prices More Volatile Now? A Long-Run Perspective

Soaring commodity prices in 2007 and 2008 raised concerns that volatility was also rising, which would have implications for welfare and therefore for the design of public policy interventions. The literature focuses on trends in commodity prices rather than their volatility characteristics. This paper contributes by examining commodity price volatility with a newly compiled monthly panel dataset on 45 individual commodity prices from the end of the 18th century until today. The main conclusions are: the timing and number of breaks in volatility vary considerably across individual commodities, cautioning against generalizations based on the use of commodity price indices; the three most significant breaks common to most commodities are the two world wars and the collapse of the Bretton-Woods system; and structural breaks marking increased price volatility are followed by breaks marking declines in volatility so that there is no upward or downward trend in volatility over time.

Understanding Declining Fluidity in the U.S. Labor Market

In this paper, we first document a clear, downward trend in labor market fluidity that is common across a variety of measures of worker and job turnover. This trend began in the early 1980s, if not somewhat earlier. Next, we present evidence for a variety of hypotheses that might explain this downward trend, which is only partly related to population demographics and is not due to the secular shift in industrial composition. Moreover, this decline in labor market fluidity seems unlikely to have been caused by an improvement in worker–firm matching or by mounting regulatory strictness in the labor or housing markets. Plausible avenues for further exploration include changes in the worker–firm relationship, particularly with regard to compensation adjustment; changes in firm characteristics, such as firm size and age; and a decline in social trust, which may have increased the cost of job searches or made both parties in the hiring process more risk averse.

Estimating the Fiscal Multiplier in Argentina

Argentinas government has resorted to fiscal policy as a countercyclical tool to mitigate the negative impact of the current economic downturn on aggregate demand. Empirical results based on a vector error correction model suggest, however, that the fiscal multiplier is relatively small and short-lived. This could reflect a number of factors, including the higher propensity of households to save during the economic downturn, the implementation lag of public expenditures, particularly of capital expenditures, and the narrow tax base that limits the impact of countercyclical revenue measures on domestic demand.

Consumer Spending and Property Taxes

A sudden and temporary change to the Italian property tax system in 2011 generated significant variation in the amount of taxes paid across home-owners. Using new questions appositely added to the Survey on Household Income and Wealth, we exploit this cross-sectional variation to provide an unprecedented analysis of the consumption effects of a tax on housing wealth. A tax hike on the main dwelling leads to large expenditure cuts among mortgagors, who hold low liquid wealth despite owning sizable illiquid assets. In contrast, higher tax rates on other residential properties affect affluent households, thereby having a modest impact on their consumer spending. Our results provide novel and direct evidence in favor of recent theories that highlight the role of household debt in the transmission of economic policies.

Shake me the money

During a natural disaster, the negative supply shock due to the destruction of productive capacity is counteracted by a positive demand shock due to public grants for assistance and reconstruction, positing an identification issue in empirical work. Focusing on the 2009 ’Aquilano’ earthquake in Italy as a case study, we take advantage of quantified measure of damages for 75,424 buildings to estimate the negative supply shock and of a law issued to allocate reconstruction grants, which resulted in a sharp, exogenous discontinuity in transfers and output behavior across neighboring municipalities to estimate the positive demand shock. Diff-in-diff analysis suggests that local output multipliers of reconstruction grants (net of marginal tax rebates) are below unity. Yet the size of the grants act as a public insurance scheme, preventing a fall in output.