WorldCat Identities

Bocola, Luigi

Overview
Works: 15 works in 44 publications in 1 language and 325 library holdings
Genres: Academic theses 
Roles: Author
Classifications: HB1,
Publication Timeline
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Most widely held works by Luigi Bocola
Exchange rate policies at the zero lower bound by Manuel Amador( )

7 editions published in 2017 in English and held by 69 WorldCat member libraries worldwide

We study how a monetary authority pursues an exchange rate objective in an environment that features a zero lower bound (ZLB) constraint on nominal interest rates and limits to arbitrage in international capital markets. If the nominal interest rate that is consistent with interest rate parity is positive, the central bank can achieve its exchange rate objective by choosing that interest rate, a well-known result in international finance. However, if the rate consistent with parity is negative, pursuing an exchange rate objective necessarily results in zero nominal interest rates, deviations from parity, capital inflows, and welfare costs associated with the accumulation of foreign reserves by the central bank. In this latter case, all changes in external conditions that increase inflows of capital toward the country are detrimental, while policies such as negative nominal interest rates or capital controls can reduce the costs associated with an exchange rate policy. We provide a simple way of measuring these costs, and present empirical support for the key implications of our framework: when interest rates are close to zero, violations in covered interest parity are more likely, and those violations are associated with reserve accumulation by central banks
Sovereign default risk and firm heterogeneity by Cristina Arellano( )

5 editions published in 2017 in English and held by 65 WorldCat member libraries worldwide

This paper studies the recessionary effects of sovereign default risk using firm-level data and a model of sovereign debt with firm heterogeneity. Our environment features a two-way feedback loop. Low output decreases the tax revenues of the government and raises the risk that it will default on its debt. The associated increase in sovereign interest rate spreads, in turn, raises the interest rates paid by firms, which further depresses their production. Importantly, these effects are not homogeneous across firms, as interest rate hikes have more severe consequences for firms that are in need of borrowing. Our approach consists of using these cross-sectional implications of the model, together with micro data, to measure the effects that sovereign risk has on real economic activity. In an application to Italy, we find that the progressive heightening of sovereign risk during the recent crisis was responsible for 50% of the observed decline in output
Assessing DSGE model nonlinearities by S. Boragan Aruoba( )

6 editions published in 2013 in English and held by 54 WorldCat member libraries worldwide

We develop a new class of nonlinear time-series models to identify nonlinearities in the data and to evaluate nonlinear DSGE models. U.S. output growth and the federal funds rate display nonlinear conditional mean dynamics, while inflation and nominal wage growth feature conditional heteroskedasticity. We estimate a DSGE model with asymmetric wage/price adjustment costs and use predictive checks to assess its ability to account for nonlinearities. While it is able to match the nonlinear inflation and wage dynamics, thanks to the estimated downward wage/price rigidities, these do not spill over to output growth or the interest rate
Self-fulfilling debt crises : a quantitative analysis by Luigi Bocola( )

6 editions published in 2016 in English and held by 41 WorldCat member libraries worldwide

This paper uses the information contained in the joint dynamics of government's debt maturity choices and interest rate spreads to quantify the importance of self-fulfilling expectations in sovereign bond markets. We consider a model of sovereign borrowing featuring endogenous debt maturity, risk averse lenders and self-fulfilling rollover crises á la Cole and Kehoe (2000). In this environment, interest rate spreads are driven by economic fundamentals and by expectations of future self-fulfilling defaults. These two sources of default risk have contrasting implications for the debt maturity choices of the government. Therefore, they can be indirectly inferred by tracking the evolution of the maturity structure of debt during a crisis. We fit the model to the Italian debt crisis of 2008-2012, finding that 12% of the spreads over this episode were due to rollover risk. Our results have implications for the effects of the liquidity provisions established by the European Central Bank during the summer of 2012
Reverse Speculative Attacks by Manuel Amador( )

5 editions published in 2016 in English and held by 41 WorldCat member libraries worldwide

In January 2015, in the face of sustained capital inflows, the Swiss National Bank abandoned the floor for the Swiss Franc against the Euro, a decision which led to the appreciation of the Swiss Franc. The objective of this paper is to present a simple framework that helps to better understand the timing of this episode, which we label a "reverse speculative attack". We model a central bank which wishes to maintain a peg, and responds to increases in demand for domestic currency by expanding its balance sheet. In contrast to the classic speculative attacks, which are triggered by the depletion of foreign assets, reverse attacks are triggered by the concern of future balance sheet losses. Our key result is that the interaction between the desire to maintain the peg and the concern about future losses can lead the central bank to first accumulate a large amount of reserves, and then to abandon the peg, just as we have observed in the Swiss case
Financial crises and lending of last resort in open economies by Luigi Bocola( )

4 editions published in 2017 in English and held by 37 WorldCat member libraries worldwide

We study financial panics in a small open economy with floating exchange rates. In our model, bank runs trigger a decline in domestic wealth and a currency depreciation. Runs are more likely when banks have dollar debt. Dollar debt emerges endogenously in response to the precautionary motive of domestic savers: dollar savings provide insurance against crises; so when crises are possible it becomes relatively more expensive for banks to borrow in local currency, which gives them an incentive to issue dollar debt. This feedback between aggregate risk and savers' behavior can generate multiple equilibria, with the bad equilibrium characterized by financial dollarization and the possibility of bank runs. A domestic lender of last resort can eliminate the bad equilibrium, but interventions need to be fiscally credible. Holding foreign currency reserves hedges the fiscal position of the government and enhances its credibility, thus improving financial stability
Quantitative sovereign default models and the European debt crisis by Luigi Bocola( )

3 editions published in 2018 in English and held by 11 WorldCat member libraries worldwide

A large literature has developed quantitative versions of the Eaton and Gersovitz (1981) model to analyze default episodes on external debt. In this paper, we study whether the same framework can be applied to the analysis of debt crises in which domestic public debt plays a prominent role. We consider a model where a government can issue debt to both domestic and foreign investors, and we derive conditions under which their sum is the relevant state variable for default incentives. We then apply our framework to the European debt crisis. We show that matching the cyclicality of public debt ---rather than that of external debt--- allows the model to better capture the empirical distribution of interest rate spreads and gives rise to more realistic crises dynamics
Productivity growth ; Asset prices ; Long-run risk ; Learning by Luigi Bocola( Book )

1 edition published in 2013 in English and held by 1 WorldCat member library worldwide

This paper documents a strong association between total factor productivity (TFP) growth and the value of U.S. corporations (measured as the value of equities and net debt for the U.S. corporate sector) throughout the postwar period. Persistent fluctuations in the first two moments of TFP growth predict two-thirds of the medium-term variation in the value of U.S. corporations relative to gross domestic product (hence-forth value-output ratio). An increase in the conditional mean of TFP growth by1% is associated to a 21% increase in the value-output ratio, while this indicator declines by 12% following a 1% increase in the standard deviation of TFP growth. A possible explanation for these findings is that movements in the first two moments of aggregate productivity affect the expectations that investors have regarding future corporate payouts as well as their perceived risk. We develop a dynamic stochastic general equilibrium model with the aim of verifying how sensible this interpretation is. The model features recursive preferences for the households, Markov-Switching regimes in the first two moments of TFP growth, incomplete information and monopolistic rents. Under a plausible calibration and including all these features, the model can account for a sizable fraction of the elasticity of the value-output ratio to the first two moments of TFP growth
Financial Crises, Dollarization, and Lending of Last Resort in Open Economies by Luigi Bocola( )

1 edition published in 2017 in English and held by 1 WorldCat member library worldwide

Foreign currency borrowing is perceived as a source of financial instability in emerging markets. We propose a theory where liability dollarization arises from an insurance motive of domestic savers. Because financial crises are associated with currency depreciations, savers are reluctant to hold assets denominated in local currency. This behavior makes local currency debt expensive, incentivizing borrowers to issue foreign currency debt. We show that this mechanism can generate multiple equilibria, with the bad equilibrium characterized by dollarization and financial instability. A domestic lender of last resort can eliminate the bad equilibrium, but interventions need to be fiscally credible. Holdings of foreign currency reserves hedge the fiscal position of the government and enhance its credibility, thus improving financial stability
The pass-through of sovereign risk by Luigi Bocola( )

1 edition published in 2015 in English and held by 1 WorldCat member library worldwide

Risk, economic growth, and the value of US corporations by Luigi Bocola( )

1 edition published in 2013 in English and held by 1 WorldCat member library worldwide

Reverse speculative attacks by Manuel Amador( )

1 edition published in 2016 in English and held by 1 WorldCat member library worldwide

Essays on nonlinear macroeconomic dynamics by Luigi Bocola( )

1 edition published in 2014 in English and held by 1 WorldCat member library worldwide

Assessing DSGE model nonlinearities by S. Boragan Aruoba( )

1 edition published in 2013 in English and held by 1 WorldCat member library worldwide

Trade and business-cycle comovement : evidence from the EU by Luigi Bocola( )

1 edition published in 2006 in English and held by 0 WorldCat member libraries worldwide

"This paper is an empirical study of the determinants of business-cycle comovement. Using a panel of European countries (1972-2004) it is found that bilateral trade intensity is a robust determinant of real comovement in Europe, this confirming the seminal study by Frankel and Rose (1998). It is also found that convergence in macroeconomic policies (especially fiscal policies) is associated to high degree of intra-European business-cycle correlation. Moreover, having controlled for policy convergence, the effect of bilateral trade on business cycle comovement weakens on average by a factor of 36%-33% with respect to that estimated according to Frankel and Rose's econometric specification, this suggesting the potential endogeneity of the set of instrumental varialbles adopted by the two authors (Gruben, Koo and Millis, 2002)."--Editor
 
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Languages
English (44)