Working papers (ABSTRACTS)
Full Papers are available upon request:
Technology and Non Technology Shocks in a Two-Sector Economy (with A. Girardi and F. Busato):
This paper estimates a reduced form two-sector real business cycle model that allows for technology and non technology shocks. These disturbances may originate in one sector and affect only the variables within that sector (sector specific shocks) or they may originate in one sector, but affect the variables of the other sectors (cross sector shocks). Long run restrictions identify the different kinds of shocks.Our main findings are: 1) the relatively larger-in-size sector drives the dynamical behavior of the aggregate economy; 2) there is no evidence of common shocks in both the analyzed sectors of U.S. manufacturing; 3) sector-specific technology shocks explain more than 70 percent of volatility’s productivity on a sector-by-sector basis, whereas sector-specific non-technology shocks explain more than 80 percent of employment volatility in each sector; 4) the shock transmission mechanism across sectors is driven from the demand side of the economy.
status: working paper
Fiscal policy coordination/competition: a general equilibrium characterization:
What about the role of fiscal policy after the creation of the EMU? Is desiderable a sort of coordinated fiscal policy as centralized monetary policy? The paper tries to answer to these questions by constructing a two country dynamic general equilibrium model, focusing on the role of tax rates on capital stocks. The model introduces the presence of public capital stock in the production function as a productive factor: this kind of capital together with tax rates on capital stocks has a key role in the resource allocation (positive approach) and in the decision for coordination or competition in tax rates (normative approach). Moreover the model is coherent with the Stability and Growth Pact since each Government has to face a zero deficit condition for its balance sheet, that makes equal to zero in expected value the difference between public revenues and expenditure. Two kinds of capital taxation are studied in the paper: the residence taxation principle (also called world wide taxation), which is the most commonly adopted principle for capital taxation in the world (also in the EMU) and the taxation at source, which is only applied in the "fiscal heavens".According to the model there is a perfect substitution between the public capital stocks and the private ones; moreover, a taxation regime is welfare improving than another if its net (from taxes) public capital accumulation is greater than the one of the other. Public capital stocks and tax rates on capital stocks are the key-variables in the decision for the best fiscal policy regime. Anyway, according to the model is not possible to assert that a bearish coordination is better than a bullish one, because it depends on the level of the competitive tax rates and on the relative weight of the public capital in a strategy of competition rather than in coordination.
status: working paper
Money Laundering in a Two Sector Economy, using the theory of Measurement (with M. Bagella and F. Busato):
This paper presents a methodology for generating otherwise unobservable quantities relying on observable (and estimated) variables, and starting out from a theoretical model. In particular, the paper applies this method for constructing a series for the money laundering over the sample 1980:01-2001:04. The analysis of the generated series suggests two main results. First, the money laundering accounts for approximately 9 percent of aggregate GDP; second, money laundering is more volatile than aggregate GDP, and it is positively correlated with it.
status: working paper
The Model of Lazy Banks: Evidence from Italy:
Lazy banks are banks that substitute project screening with project collateral. This definition comes from a theoretical paper of Manove, Padilla and Pagano (2001), where safer borrowers post more collateral than riskier borrowers; in this way, the formers give a positive signal in order to be evaluated by a bank. Moreover, because screening costs are charged only on the accepted loan proposals, to avoid paying screening costs for bad borrowers, good borrowers prefer to signal themselves through a big amount of collateral posted. The banks, on their turn, learning this game, reduce progressively their screening activity; consequently riskier projects are not financed, thus lowering social welfare. Moreover, where law enforcement is high, collateralized loans increase. This paper aims to test the negative relationship between collateral and project screening implied by the conclusions of the theoretical model of Manove, Padilla and Pagano (2001). First, we test for Italy (sample 1999:01-2006:02) if there is any form of substitution between collateral and project screening by regressing for Italy the amount of collateralized loans on the ratio 'number of employees/amount of used loans' (as a measure of project screening) and on a measure of law enforcement (the length of trials); we find evidence in favour of Manove, Padilla and Pagano’s theory for the long-duration loans: when the ratio 'number of employees/amount of used loans' decreases, the amount of collateralized loans increases. The second level of our study is an ex-post analysis, i.e. we aim to test if the collateralization lowers the probability of default for a loan. We find evidence in favour of the so called “commitment view”, which suggests that collateral provides a credible mechanism for commitment against agency risk such as moral hazard and asymmetric information, and against the “hedging view”, according to which collateral provides a convenient hedge against realized ex-post risk of default. In fact, there is no significant relationship between the collateralization and the probability of default for a loan for the short-duration loans and a positive significant relationship between the collateralization and the probability of default for a loan for the long-duration loans.
status: working paper