Papers by Fabrizio Zampolli
WORLD SCIENTIFIC eBooks, 2023
Research Papers in Economics, Mar 1, 2016
BIS Working Papers are written by members of the Monetary and Economic Department of the Bank for... more BIS Working Papers are written by members of the Monetary and Economic Department of the Bank for International Settlements, and from time to time by other economists, and are published by the Bank. The papers are on subjects of topical interest and are technical in character. The views expressed in them are those of their authors and not necessarily the views of the BIS. This publication is available on the BIS website (www.bis.org).
Research Papers in Economics, 2016
BIS Working Papers are written by members of the Monetary and Economic Department of the Bank for... more BIS Working Papers are written by members of the Monetary and Economic Department of the Bank for International Settlements, and from time to time by other economists, and are published by the Bank. The papers are on subjects of topical interest and are technical in character. The views expressed in them are those of their authors and not necessarily the views of the BIS. This publication is available on the BIS website (www.bis.org).
IFC Bulletins chapters, 2015
We examine how inflation risks have changed over time in a large panel of advanced and emerging m... more We examine how inflation risks have changed over time in a large panel of advanced and emerging market economies (EMEs). Quantile regressions show a general decline in upside inflation risks over time, reflecting successful disinflationary processes and the adoption of inflation targeting regimes. But important non-linearities remain. In advanced economies, the zero lower bound represents a prominent source of downside inflation risk. In EMEs, the exchange rate remains a powerful source of nonlinearity, with large exchange rate depreciations associated with upside inflation risks. Tightening financial conditions increase both up- and downside inflation risks.
We examine how inflation risks have changed over time in a large panel of advanced and emerging m... more We examine how inflation risks have changed over time in a large panel of advanced and emerging market economies (EMEs). Quantile regressions show a general decline in upside inflation risks over time, reflecting successful disinflationary processes and the adoption of inflation targeting regimes. But important non-linearities remain. In advanced economies, the zero lower bound represents a prominent source of downside inflation risk. In EMEs, the exchange rate remains a powerful source of nonlinearity, with large exchange rate depreciations associated with upside inflation risks. Tightening financial conditions increase both upand downside inflation risks.
We propose a method for computing the distribution of the potential fiscal cost of a banking cris... more We propose a method for computing the distribution of the potential fiscal cost of a banking crisis - a key input in assessing the adequacy of a country's fiscal buffers. First, we use a cross-section of banking crises to identify the risk factors that predict the post-crisis increase in public sector debt - a measure of the overall fiscal cost of a crisis. Next, we use these risk factors to compute country-specific distributions of that cost in the event of a crisis. We find that the level and growth of credit to the private non-financial sector, foreign exchange reserves and the ratio of bank capital to assets are relevant predictors. As an illustration, we apply the method to the conditions prevailing in 2018 and find that the potential fiscal costs could be sizeable: with a probability of 95%, public debt could approach 40% of GDP on average across countries. Our illustrative estimates are probably upper bounds: while they indicate that higher bank capital can substantially ...
Rethinking Fiscal Policy after the Crisis
BIS Working Papers are written by members of the Monetary and Economic Department of the Bank for... more BIS Working Papers are written by members of the Monetary and Economic Department of the Bank for International Settlements, and from time to time by other economists, and are published by the Bank. The papers are on subjects of topical interest and are technical in character. The views expressed in them are those of their authors and not necessarily the views of the BIS. This publication is available on the BIS website (www.bis.org).
Economic Modelling, 2019
BIS Working Papers are written by members of the Monetary and Economic Department of the Bank for... more BIS Working Papers are written by members of the Monetary and Economic Department of the Bank for International Settlements, and from time to time by other economists, and are published by the Bank. The papers are on subjects of topical interest and are technical in character. The views expressed in them are those of their authors and not necessarily the views of the BIS. This publication is available on the BIS website (www.bis.org).
The composition of public debt by maturity is irrelevant in the standard New Keynesian model of m... more The composition of public debt by maturity is irrelevant in the standard New Keynesian model of monetary policy. Nevertheless, central banks have, since the outset of the crisis, purchased large amounts of government bonds in the attempt to support economic activity and stem deflationary pressures. Such moves have often been justified by appealing to portfolio rebalancing effects, which are not well understood at a conceptual level. Without better theory, assessing their empirical relevance might also prove elusive. This paper reviews what theory has to say about the role of sovereign debt management as a tool of monetary policy.Full publication: Threat of fiscal dominance? http://ssrn.com/abstract=2078895
for helpful comments on previous drafts. Of course, all mistakes, omissions, and obscurities are ... more for helpful comments on previous drafts. Of course, all mistakes, omissions, and obscurities are my own.
We construct a measure of the short-term world interest rate using principal component analysis. ... more We construct a measure of the short-term world interest rate using principal component analysis. Drawing on real interest rate data for 18 OECD countries for the period 1985-2008, persistent deviations from the world interest rate that cannot be explained by movements in the real exchange rate are documented. A theoretical mdoel predicts that these unexplained deviations capture foreign exchange rate risk premia. Using panel data techniques, we test the theoretical prediction that a rise in conditional consumption growth volatility relative to the rest of the world reduces the foreign exchange rate risk premia and, therefore, the real interest rate. Our main result is that we find a robust and significant negative relation between the volatility in consumption growth and the level of real interest rates relatiev to the world interest rate, supporting this hypothesis. We test the hypothesis that the empirical negative relation between the two variables captuers the relation between r...
Oxford Review of Economic Policy, 2013
The financial crisis and subsequent economic recession led to a rapid increase in the issuance of... more The financial crisis and subsequent economic recession led to a rapid increase in the issuance of public debt. But large-scale purchases of bonds by the Federal Reserve, and other major central banks, have significantly reduced the scale and maturity of public debt that would otherwise have been held by the private sector. We present new evidence that tilting the maturity structure of private sector holdings significantly influences term premia, even outside crisis times. Our framework helps explain both the bond yield conundrum and the effectiveness of quantitative easing. We suggest that these findings raise two important policy questions. One is: should a central bank, contrary to recent orthodoxy, use its balance sheet as an additional complementary instrument of monetary policy to influence, as part of the monetary transmission mechanism, the long-term interest rate? The second is: how should central banks and governments ensure that debt management properly takes account of the implications for both monetary and financial stability?
Journal of Economic Dynamics and Control, 2006
German Economic Review, 2011
A two-country model is developed to show how the optimality of a currency union depends on whethe... more A two-country model is developed to show how the optimality of a currency union depends on whether it brings an economic dividend in terms of potential growth and the Balassa-Samuelson (BS) effect (the steady appreciation of the real exchange rate due to cross-country differences in intersectoral productivity gaps). The model shows that such dividend needs to be larger, the higher the BS effect, the smaller the size of the economy, the larger the cross-country difference in the standard deviation of the supply shocks, the smaller their correlation and the larger the standard deviation of real exchange rate shocks. We calibrate the model to quantify such dividend as a function of plausible ranges of the parameter values. The results suggest that both the BS effect and the size of real exchange rate shocks play a key role in evaluating the optimality of accessing the currency union.
European Economic Review, 1994
We analyze the effects of government size on output variability in the context of a RBC model in ... more We analyze the effects of government size on output variability in the context of a RBC model in which government size is parameterized by the income tax rate and the share of government purchases in output. The model implies that: (i) income taxes are destabilizing, and (ii) for most specifications considered, government purchases are stabilizing. We compare those predictions with the results of simple crosscountry regressions using data for 22 OECD countries. The estimated relationship between empirical indicators of government size and measures of GDP variability appears far stronger than the model predicts, and often has the opposite sign.
ECB Working Paper No. 445, 2005
In 2005 all ECB publications will feature a motif taken from the €50 banknote.
The interest rate effects of government debt maturity
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Papers by Fabrizio Zampolli