research papers
Who's in? Household-targeted Government Policies and the Role of Financial Literacy in Market Participation [paper]
(Job Market paper)
This paper examines how household-targeted government policies influence financial market participation conditional on financial literacy, focusing on potential Central Bank Digital Currency (CBDC) adoption. Due to the lack of empirical CBDC data, I use the introduction of retail Treasury Bonds in Italy as a proxy to investigate how financial literacy affects households' likelihood to engage with the new instrument. Using the Bank of Italy's Survey on Household Income and Wealth, I explore how financial literacy influenced households’ participation in the Treasury Bond market following the 2012 introduction of retail Treasury Bonds, showing that low-financially literate households are more likely to participate than other household groups. Based on these findings, I develop a theoretical model to explore the potential implications of financial literacy for CBDC adoption, showing that low-literate households allocate more to CBDC due to limited access to risky assets, while high-literate households use risky assets to safeguard against income uncertainty. These results highlight the role of financial literacy in shaping portfolio choices and CBDC adoption.
Central Bank Digital Currency with Collateral-constrained Banks [arXiv]
(with Hanfeng Chen)
We analyze the risks to bank intermediation following the introduction of a central bank digital currency (CBDC). The CBDC competes with commercial bank deposits as the household's source of liquidity. We revisit the result in the literature regarding the equivalence of payment systems by introducing a collateral constraint for banks when borrowing from the central bank. When comparing two equilibria with and without the CBDC, the central bank can ensure the same equilibrium allocation and price system by offering loans to banks. However, to access loans, banks must hold collateral at the expense of extending credit to firms, and the central bank assumes part of the credit-extension role. Thus, in the equivalence analysis, while the CBDC introduction has no real effects on the economy, it does not guarantee full neutrality as it affects banks' business models. In a dynamic model extension, we analyse the effects of an increase in the CBDC and show that the CBDC not only does not cause bank disintermediation or crowd out of deposits but may foster an expansion of bank credit to firms.
Central Bank Digital Currency: Preference Shock Transmission and Welfare Implications
(with Hanfeng Chen)
We study the implications of a central bank digital currency (CBDC) for the transmission of household preference shocks and welfare within a New Keynesian framework, where the CBDC competes with bank deposits for household resources and banks have market power. First, we show that an increase in the relative benefit of CBDC has a mildly expansionary effect, weakening bank market power and significantly reducing the deposit spread. The greater benefit of CBDC allows households to economize on liquid asset holdings, reducing both CBDC and deposit balances. However, the risk of bank disintermediation remains low, as deposit outflows are limited by the large decline in the deposit spread. Second, we examine the welfare implications of CBDC rate setting by optimizing simple Taylor-rule-based interest rate policies under different banking structures and levels of relative CBDC benefit. Our findings show that adopting a CBDC interest rate rule can improve welfare, with larger gains when the policy is optimized. Welfare gains increase with the relative CBDC benefit and are generally higher when banks have market power. Moreover, we find that the optimal CBDC rate response varies across banking structures: under monopolist banks, the CBDC rate should respond aggressively to inflation, whereas in competitive banks, it should focus on output stabilization.
research in progress
The Deposit Channel of Monetary Policy in the euro area
(with Hanfeng Chen)
other works
A Comment on Safe Assets by Barro et al. (2022) [EconStor]
(with Guillaume Coqueret, Martial Laguerre, Christoph Weber )
Barro et al. (2022) investigate the quantity of safe assets held in the cross-section of developed countries and find that the average safe-asset ratio (ratio of safe assets to total assets) was 37% in 2015 and has remained relatively stable over time. They also document a crowding-out coefficient for private bonds relative to public bonds of around −0.5. In the second part of the analysis, they simulate a heterogeneous agent model with rare disasters and risk aversion to match the empirical findings. This report seeks to reproduce and confirm their results. Overall, we were largely able to replicate their findings and propose a few robustness checks. Apart from two regression outputs for which the signs and significance do not change, our results are very close to those of the original paper. Alternative models and estimators do not change the signs or significance levels. A more systematic approach to the parameter values in the simulations also points towards solid conclusions.
Gender pay gap: a route from the North to the South of Italy [RePEc]
This paper analyzes the gender pay gap across different regions in Italy, using the Oaxaca-Blinder decomposition method. We expect regional heterogeneity, both in terms of the gender pay gap and in its determinants. Our results show that, on a regional basis, the retribution gap widely varies, as its percentages of the explained and unexplained parts. Workers’ observable characteristics, related to both labor and personal features, that justify the explained part at a national level are confirmed by the regional data. Furthermore, data on the activity rate show that both at a national and regional level, female participation to the labor market, although it has been improving in recent years, is still profoundly lower than the male one. Therefore, we implement the Heckman correction, which reveals that women’s model coefficients are overestimated, at a national level and in half of the Italian regions. This result suggests that, although female participation in the labor market is lower than the male one, the fewer women participating in the labor market, on average, have higher productivity than men.
presentations
Central Bank Digital Currency with Collateral-constrained Banks [poster]
Economics of Payments XIII conference | Oesterreichische Nationalbank, Vienna | September 25-27, 2024
Central Bank Digital Currency with Collateral-constrained Banks [slides]
16th Nordic Summer Symposium in Macroeconomics | Normac 2024, Snekkersten | August 6-9, 2024
Unveiling the Interplay between Central Bank Digital Currency and Bank Deposits [slides]
CEPR-ECB Conference “The macroeconomic implications of CBDCs” | European Central Bank, Frankfurt am Main | November 23-24, 2023
Unveiling the Interplay between Central Bank Digital Currency and Bank Deposits [poster]
2nd Conference on the Economics of CBDC by the Bank of Canada and Sveriges Riksbank | Sveriges Riksbank, Stockholm | November 16-17, 2023
Unveiling the Interplay between Central Bank Digital Currency and Bank Deposits [slides]
Second PhD Workshop in Money and Finance | Sveriges Riksbank, Stockholm | May 15, 2023