The project has resulted in several articles, which have been published in leading academic journals, presented widely to academic and policy audiences, and cited by the general audience press. These articles, briefly summarized below, employ a Keynesian growth approach to revisit some of the most prominent current macroeconomic debates.
What is the impact of adopting a common currency on capital flows and productivity? The paper “A Theory of Monetary Union and Financial Integration” (Review of Economic Studies, 2022) tackles this question by providing a novel framework connecting monetary policy, capital flows and productivity growth. It shows that forming a currency union leads to higher capital mobility, by eliminating exchange rate risk. High capital mobility, however, may give rise to episodes of disorderly capital flights, associated with capital misallocation and productivity losses. The paper thus offers a novel perspective on the experience of the euro, characterized by large and volatile capital flows among member countries, and on the policy interventions that can reconcile free capital mobility and healthy growth in monetary unions.
While much has been written about the global saving glut – i.e. the large flows of capital running from developing countries to the United States – its impact on global growth is still poorly understood. To tackle this issue, the paper “The Global Financial Resource Curse” (American Economic Review, 2025), joint with Gianluca Benigno and Martin Wolf, develops a novel framework connecting capital flows and productivity. It shows that capital inflows may harm productivity growth in the United States, by reducing the competitiveness of U.S. firms and their incentives to innovate. This insight runs against the conventional view stating that capital inflows foster growth by facilitating investments. Moreover, the model suggests that the U.S. productivity growth slowdown may negatively affect developing countries, since part of their productivity growth depends on technology imports from the United States. The model is useful to think about the impact of different policy interventions - such as reserve accumulation by developing countries, or innovation policies in the United States – on global growth.
The paper “Monetary Policy in the Age of Automation”, joint with Martin Wolf, provides a framework connecting monetary policy and firms’ adoption of automation technologies. The model highlights the presence of an automation effect of monetary policy: a monetary easing, by lowering the cost of capital, may induce firms to adopt more capital-intensive technologies. One interesting implication of this effect is that the economy features multiple long-run equilibria consistent with full employment, each associated with different degrees of automation and productivity. Monetary interventions may move the economy across different long-run equilibria, and a temporary monetary policy expansion may permanently increase firms’ use of automation technologies, labor productivity and real wages.
What is the effect of a large negative supply shock, for instance caused by a pandemic, on growth and inflation? The article “The Scars of Supply Shocks” (Journal of Monetary Economics, 2024), joint with Martin Wolf, addresses this question with the help of the Keynesian growth framework. The paper shows that, contrary to conventional wisdom, a large supply disruption may lower inflation. The reason is that large negative supply shocks, by depressing firms’ investment, result in persistent drops in output. The associated negative wealth effect lowers demand and inflation. A companion short paper, titled “Covid-19 Coronavirus and Macroeconomic Policy”, revisits the impact of the Covid-19 shock through the lens of the Keynesian growth framework.
The recovery from the Covid-19 recession has been characterized by a global rise in inflation. The paper “Monetary Cooperation during Global Inflation Surges”, joint with Federica Romei, provides a framework useful to understand why this has been the case. The paper shows that the reallocation of expenditure from services to goods that has characterized the pandemic may push the global economy into stagflation. The reason is that inflation is needed to facilitate the sectoral reallocation of production, and to mitigate the impact of the shock on employment. The paper also shows how inflation gets transmitted across countries, and discusses the risk that national monetary authorities may engage in perverse reverse currency wars.
