Browsing by Author "Caggiano, Giovanni"

Sort by: Order: Results:

Now showing items 1-8 of 8
  • Angelini, Giovanni; Caggiano, Giovanni; Castelnuovo, Efrem; Fanelli, Luca (2020)
    Bank of Finland Research Discussion Papers 13/2020
    How large are government spending and tax multipliers? The fiscal proxy-SVAR literature provides heterogeneous estimates, depending on which proxies - fiscal or non-fiscal - are used to identify fiscal shocks. We reconcile the existing estimates via flexible vector autoregressive model that allows to achieve identification in presence of a number of structural shocks larger than that of the available instruments. Our two main findings are the following. First, the estimate of the tax multiplier is sensitive to the assumption of orthogonality between total factor productivity (non-fiscal proxy) and tax shocks. If this correlation is assumed to be zero, the tax multiplier is found to be around one. If such correlation is nonzero, as supported by our empirical evidence, we find a tax multiplier three times as large. Second, we find the spending multiplier to be robustly larger than one across different models that feature different sets of instruments. Our results are robust to the joint employment of different fiscal and non-fiscal instruments.
  • Caggiano, Giovanni; Castelnuovo, Efrem; Pellegrino, Giovanni (2017)
    Bank of Finland Research Discussion Papers 6/2017
    Published in European Economic Review, 100, November 2017: 257-272
    We employ a parsimonious nonlinear Interacted-VAR to examine whether the real effects of uncertainty shocks are greater when the economy is at the Zero Lower Bound. We find the contractionary effects of uncertainty shocks to be statistically larger when the ZLB is binding, with differences that are economically important. Our results are shown not to be driven by the contemporaneous occurrence of the Great Recession and high financial stress, and to be robust to different ways of modeling unconventional monetary policy. These findings lend support to recent theoretical contributions on the interaction between uncertainty shocks and the stance of monetary policy.
  • Caggiano, Giovanni; Castelnuovo, Efrem; Pellegrino, Giovanni (2017)
    European Economic Review November
    BoF DP 6/2017
    We employ a parsimonious nonlinear Interacted-VAR to examine whether the real effects of uncertainty shocks are greater when the economy is at the Zero Lower Bound. We find the contractionary effects of uncertainty shocks to be statistically larger when the ZLB is binding, with differences that are economically important. Our results are shown not to be driven by the contemporaneous occurrence of the Great Recession and high financial stress, and to be robust to different ways of modeling unconventional monetary policy. These findings lend support to recent theoretical contributions on the interaction between uncertainty shocks and the stance of monetary policy.
  • Caggiano, Giovanni; Castelnuovo, Efrem (2021)
    Bank of Finland Research Discussion Papers 1/2021
    We estimate a novel measure of global financial uncertainty (GFU) with a dynamic factor framework that jointly models global, regional, and country-specific factors. We quantify the impact of GFU shocks on global output with a VAR analysis that achieves self-identifcation via a combination of narrative, sign, ratio, and correlation restrictions. We find that the world output loss that materialized during the great recession would have been 13% lower in absence of GFU shocks. We also unveil the existence of a global finance uncertainty multiplier: the more global financial conditions deteriorate after GFU shocks, the larger the world output contraction is.
  • Caggiano, Giovanni; Castelnuovo, Efrem; Kima, Richard (2020)
    Bank of Finland Research Discussion Papers 11/2020
    We estimate a three-variate VAR using proxies of global financial uncertainty, the global financial cycle, and world industrial production to simulate the effects of the jump in financial uncertainty observed in correspondence of the Covid-19 outbreak. We predict the cumulative loss in world output one year after the uncertainty shock due to Covid-19 to be about 14%.
  • Angelini, Giovanni; Bacchiocchi, Emanuele; Caggiano, Giovanni; Fanelli, Luca (2017)
    Bank of Finland Research Discussion Papers 35/2017
    We propose a new non-recursive identification scheme for uncertainty shocks, which exploits breaks in the unconditional volatility of macroeconomic variables. Such identification approach allows us to simultaneously address two major questions in the empirical literature on uncertainty: (i) Does the relationship between uncertainty and economic activity change across macroeconomic regimes? (ii) Is uncertainty a major cause or effect (or both) of decline in economic activity? Empirical results based on a small-scale VAR with US monthly data for the period 1960-2015 suggest that (i) the effects of uncertainty shocks are regime-dependent, and (ii) uncertainty is an exogenous source of decline of economic activity, rather than an endogenous response to it.
  • Caggiano, Giovanni; Castelnuovo, Efrem; Nodari, Gabriela (2017)
    Bank of Finland Research Discussion Papers 8/2017
    1.7.2020: PDF updated
    We investigate the role played by systematic monetary policy in tackling the real effects of uncertainty shocks in U.S. recessions and expansions. We model key indicators of the business cycle with a nonlinear VAR that allows for different dynamics in busts and booms. Uncertainty shocks are identi ed by focusing on historical events that are associated to jumps in nancial volatility. Uncertainty shocks hitting in recessions are found to trigger a more abrupt drop and a faster recovery in real activity than in expansions. Counterfactual simulations suggest that the effectiveness of systematic monetary policy in stabilizing real activity is greater in expansions. Finally, we provide empirical and narrative evidence pointing to a risk management approach by the Federal Reserve.
  • Andreasen, Martin M.; Caggiano, Giovanni; Castelnuovo, Efrem; Pellegrino, Giovanni (2021)
    Bank of Finland Research Discussion Papers 13/2021
    This paper uses a nonlinear vector autoregression and a non-recursive identification strategy to show that an equal-sized uncertainty shock generates a larger contraction in real activity when growth is low (as in recessions) than when growth is high (as in expansions). An estimated New Keynesian model with recursive preferences and approximated to third order around its risky steady state replicates these state-dependent responses. The key mechanism behind this result is that firms display a stronger upward nominal pricing bias in recessions than in expansions, because recessions imply higher inflation volatility and higher marginal utility of consumption than expansions.