Submitted & Working Papers
- Green Asset Pricing, with G Benmir (LSE) & I Jaccard (ECB Research).
Media: Bloomberg – Central Banking – ECB Research Bulletin – Speech by Christine Lagarde – VoxEu
2021 European Finance Association Best Paper in Responsible Finance.
Abstract: This paper studies the design of a carbon tax when environmental factors, such as air carbon-dioxide emissions (CO2), directly affect agents’ marginal utility of consumption. Our first result is that the optimal tax is determined by the shadow price of CO2 emissions. We then use asset-pricing theory to estimate this implicit price in the data and find that the optimal tax is pro-cyclical. It is therefore optimal to use the carbon tax to “cool down” the economy during booms and stimulate it in recessions. The optimal policy not only generates large welfare gains, it also reduces risk premiums and raises the average risk-free real rate. The effect of the tax on asset prices and welfare critically depends on the emission-abatement technology.
ECB WP Slides
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Social Learning about Monetary Policy at the Effective-Lower Bound, with J Arifovic (U. Vancouver), A Grimaud (U. Vienna), & I Salle (U. Ottawa).
Revise and Resubmit Journal of Money, Credit and Banking.
Abstract: The first contribution of this paper is to develop a model that jointly accounts for the missing disinflation in the wake of the Great Recession and the subsequently observed inflation-less
recovery. The key mechanism works through heterogeneous expectations that may durably lose their anchorage to the central bank (CB)’s target and coordinate on particularly persistent below-target paths. We jointly estimate the structural and the learning parameters of the model by matching moments from both macroeconomic and Survey of Professional Forecasters data. The welfare cost associated with those dynamics may be reduced if the CB communicates to the agents its target or its own inflation forecasts, as communication helps anchor expectations at the target. However, the CB may lose its credibility whenever its announcements become decoupled from actual inflation, for instance in the face of large and unexpected shocks.
Bank of Canada Working Paper
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Environmental Subsidies to Mitigate Net-Zero Transition Costs, with E Jondeau (HEC Lausanne), G Levieuge (Banque de France), JG Sahuc (Banque de France).
Media: LSE Business Review.
Abstract: We explore the role of public subsidies in mitigating the transition costs associated with achieving a climate-neutral objective by 2060. To this end, we develop and estimate a quantitative macro-climate model for the world economy featuring an endogenous market structure for carbon abatement products. Public subsidies, fully financed by a carbon tax, are found to be an efficient instrument to promote firm entry into the abatement good sector by fostering competition and lowering the selling price of such products. We estimate that the subsidy, optimally distributed between startups at 60\% and existing companies at 40%, would save nearly $ 2.9 trillion in world GDP each year by 2060. Finally, delaying the net-zero transition would imply giving an even larger share to startups.
Paper Slides
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Optimal Monetary Policy in an Estimated SIR Model with G Benmir (LSE) & I Jaccard (ECB Research).
Abstract: This paper studies the design of Ramsey optimal monetary policy in a Health New Keynesian (HeNK) model with Susceptible, Infected and Recovered (SIR) agents. The nonlinear model is estimated with maximum likelihood techniques on Euro Area data. Our objective is to deconstruct the mechanism by which contagion risk affects the conduct of monetary policy. If monetary policy is the only game in town, we find that optimal policy features significant deviations from price stability to mitigate the effect of the pandemic. The best outcome is obtained when the optimal Ramsey policy is combined with a lockdown strategy of medium intensity. In this case, monetary policy can concentrate on its price stabilization objective.
Paper
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The Dynamic Effects of Weather Shocks on Agricultural Production with C Crofils (Dauphine) & E Gallic (AMSE).
Abstract: The paper investigates the dynamic effects of weather shocks on monthly agricultural production in Peru with local projections. An adverse weather shock, measured by an excess of heat or rain, always generates a negative downturn in agricultural production, but its magnitude and duration depend on several factors such as the type of crop concerned, the land geographical type and the season. On average, a weather shock can cause a monthly decline by 5% of agricultural production up to four consecutive months. The response is time and space dependent. A shock in tropical forest regions or occurring during growing season exhibits a much larger response. At a macroeconomic level, weather shocks entail a surge in inflation and reduction in aggregate production.
Paper
Publications
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Weather Shocks (2020).
European Economic Review , w/ E Gallic. pdf file online appendix dynare 4.5 code dynare 4.6+ code -
Global Banking and the Conduct of Macroprudential Policy in a Monetary Union (2017)
Journal of Macroeconomics, w/ JC Poutineau. pdf Appendix dynare code Published in a Special issue on Banking in Macroeconomic Theory and Policy -
A Welfare Analysis of Macroprudential Policy Rules in the Euro Area (2017)
Revue d’Economie Politique 127(2), 191-226 w/ JC Poutineau. pdf file dynare file Data -
Financial Frictions and the Extensive Margin of Activity (2015)
Research in Economics, 69(4), 525-554 w/ JC Poutineau. pdf file dynare file data -
Cross-border Banking Flows Spillovers in the Eurozone: Evidence from an Estimated DSGE Model (2015)
Journal of Economic Dynamics and Control, 51, 378-403 w/ JC Poutineau. pdf dynare file Technical Appendix
Articles for Teaching
- The analytics of the 3-equation New Keynesian Model (2015)
Economics and Business Review 2015, vol. 15, no. 2 w/ JC Poutineau & K Sobczak. dynare file - A Primer on Macroprudential Policy (2015)
Journal of Economic Education, 46(1), 1-15, w/ JC Poutineau. pdf file
French Papers (3)
- L’impact de la crise financière sur la performance de la politique monétaire conventionnelle de la zone Euro ASAP 2017
Revue Economique w/ JC Poutineau & E Gallic [pdf] - Quelle prise en compte des caractéristiques nationales dans les mesures macro-prudentielles en zone euro? (2015)
Revue Française d’Economie w/ JC Poutineau. - Intégration bancaire et conjoncture macroéconomique dans une union monétaire hétérogène (2013)
Brussels Economic Review, vol. 56(3-4), pages 241-260 w/ JC Poutineau. [technical appendix] [CEPR’s english version]