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Massimo Ferrari

International & European Relations

Division

International Policy Analysis

Current Position

Economist

Fields of interest

Macroeconomics and Monetary Economics,International Economics,Mathematical and Quantitative Methods

Email

Massimo.Ferrari1@ecb.europa.eu

Education
2013-2017

PhD in Economics, Catholic University of Milan

Awards
2017

Best PhD thesis award, Società Italiana degli Economisti (SIE)

Teaching experience
2015-

Macroeconomics, Catholic University of Milan

18 June 2021
WORKING PAPER SERIES - No. 2568
Details
Abstract
In this paper we explore the cross-country implications of climate-related mitigation policies. Specifically, we set up a two-country, two-sector (brown vs green) DSGE model with negative production externalities stemming from carbon-dioxide emissions. We estimate the model using US and euro area data and we characterize welfare-enhancing equilibria under alternative containment policies. Three main policy implications emerge: i) fiscal policy should focus on reducing emissions by levying taxes on polluting production activities; ii) monetary policy should look through environmental objectives while standing ready to support the economy when the costs of the environmental transition materialize; iii) international cooperation is crucial to obtain a Pareto improvement under the proposed policies. We finally find that the objective of reducing emissions by 50%, which is compatible with the Paris agreement's goal of limiting global warming to below 2 degrees Celsius with respect to pre-industrial levels, would not be attainable in absence of international cooperation even with the support of monetary policy.
JEL Code
F42 : International Economics→Macroeconomic Aspects of International Trade and Finance→International Policy Coordination and Transmission
E50 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→General
E60 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→General
F30 : International Economics→International Finance→General
27 January 2021
WORKING PAPER SERIES - No. 2516
Details
Abstract
This paper proposes a new methodology based on textual analysis to forecast U.S. recessions. Specifically, the paper develops an index in the spirit of Baker et al. (2016) and Caldara and Iacoviello (2018) which tracks developments in U.S. real activity. When used in a standard recession probability model, the index outperforms the yield curve based forecast, a standard method to forecast recessions, at medium horizons, up to 8 months. Moreover, the index contains information not included in yield data that are useful to understand recession episodes. When included as an additional control to the slope of the yield curve, it improves the forecast accuracy by 5% to 30% depending on the horizon. These results are stable to a number of different robustness checks, including changes to the estimation method, the definition of recessions and controlling for asset purchases by major central banks. Yield and textual analysis data also outperform other popular leading indicators for the U.S. business cycle such as PMIs, consumers' surveys or employment data.
JEL Code
E17 : Macroeconomics and Monetary Economics→General Aggregative Models→Forecasting and Simulation: Models and Applications
E47 : Macroeconomics and Monetary Economics→Money and Interest Rates→Forecasting and Simulation: Models and Applications
E37 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Forecasting and Simulation: Models and Applications
C25 : Mathematical and Quantitative Methods→Single Equation Models, Single Variables→Discrete Regression and Qualitative Choice Models, Discrete Regressors, Proportions
C53 : Mathematical and Quantitative Methods→Econometric Modeling→Forecasting and Prediction Methods, Simulation Methods
23 November 2020
WORKING PAPER SERIES - No. 2490
Details
Abstract
In this paper, we apply textual analysis and machine learning algorithms to construct an index capturing trade tensions between US and China. Our indicator matches well-known events in the US-China trade dispute and is exogenous to the developments on global financial markets. By means of local projection methods, we show that US markets are largely unaffected by rising trade tensions, with the exception of those firms that are more exposed to China, while the same shock negatively affects stock market indices in EMEs and China. Higher trade tensions also entail: i) an appreciation of the US dollar; ii) a depreciation of EMEs currencies; iii) muted changes in safe haven currencies; iv) portfolio re-balancing between stocks and bonds in the EMEs. We also show that trade tensions account for around 15% of the variance of Chinese stocks while their contribution is muted for US markets. These findings suggest that the US-China trade tensions are interpreted as a negative demand shock for the Chinese economy rather than as a global risk shock.
JEL Code
D53 : Microeconomics→General Equilibrium and Disequilibrium→Financial Markets
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
F13 : International Economics→Trade→Trade Policy, International Trade Organizations
F14 : International Economics→Trade→Empirical Studies of Trade
C55 : Mathematical and Quantitative Methods→Econometric Modeling→Modeling with Large Data Sets?
19 November 2020
WORKING PAPER SERIES - No. 2488
Details
Abstract
We examine the open-economy implications of the introduction of a central bank digital currency (CBDC).We add a CBDC to the menu of monetary assets available in a standard two-country DSGE model with financial frictions and consider a broad set of alternative technical features in CBDC design. We analyse the international transmission of standard monetary policy and technology shocks in the presence and absence of a CDBC and the implications for optimal monetary policy and welfare. The presence of a CBDC amplifies the international spillovers of shocks to a significant extent, thereby increasing international linkages. But the magnitude of these effects depends crucially on CBDC design and can be significantly dampened if the CBDC possesses specific technical features. We also show that domestic issuance of a CBDC increases asymmetries in the international monetary system by reducing monetary policy autonomy in foreign economies.
JEL Code
E50 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→General
F30 : International Economics→International Finance→General
30 June 2020
WORKING PAPER SERIES - No. 2432
Details
Abstract
In this paper, I incorporate a complex network model into a state of the art stochastic general equilibrium framework with an active interbank market. Banks exchange funds one another generating a complex web of interbanking relations. With the tools of network analysis it is possible to study how contagion spreads between banks and what is the probability and size of a cascade (a sequence of defaults) generated by a single initial episode. Those variables are a key component to understand systemic risk and to assess the stability of the banking system. In extreme scenarios, the system may experience a phase transition when the consequences of one single initial shock affect the entire population. I show that the size and probability of a cascade evolve along the business cycle and how they respond to exogenous shocks. Financial shocks have a larger impact on contagion probability than real shocks that, however, are long lasting. Additionally I find that monetary policy faces a trade off between financial stability and macroeconomic stabilization. Government spending shocks, on the contrary, have smaller effects on both.
JEL Code
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
D85 : Microeconomics→Information, Knowledge, and Uncertainty→Network Formation and Analysis: Theory
23 March 2020
ECONOMIC BULLETIN - BOX
Economic Bulletin Issue 2, 2020
Details
Abstract
This box presents a simple indicator for US real economic activity based on the textual analysis of newspaper articles. The indicator correlates well with US contractions and NBER recession dates. In order to formally assess the predictive information content of the index, it is included in a regression framework in which US recessions are forecast. Results suggest that the index has good forecasting properties, outperforming a standard yield curve model at short horizons (up to eight months ahead). The text analysis index also improves the forecasting performance of standard yield curve models at longer horizons. Taken together, these results suggest that the index is useful for monitoring and predicting economic developments, particularly over short horizons. This approach also has the advantage of being easily updatable (on a daily basis) and applicable to different countries.
JEL Code
C1 : Mathematical and Quantitative Methods→Econometric and Statistical Methods and Methodology: General
C25 : Mathematical and Quantitative Methods→Single Equation Models, Single Variables→Discrete Regression and Qualitative Choice Models, Discrete Regressors, Proportions
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
E37 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Forecasting and Simulation: Models and Applications
25 April 2019
ECONOMIC BULLETIN - BOX
Economic Bulletin Issue 3, 2019
Details
Abstract
This box presents a methodology to disentangle four main drivers of EMEs currencies swings: spillovers from US shocks, global risk appetite, interest rate effects and idiosyncratic domestic shocks. The main finding is that while the sell-off - between January and August 2018 - was mainly related to US and global risk factors, the recovery since then is driven by improved domestic conditions.
JEL Code
F31 : International Economics→International Finance→Foreign Exchange
2021
SUERF Policy Brief
  • Ferrari, M., Pagliari, M. S.
2021
Journal of Banking & Finance
  • Ferrari, M., Kearns, J., Schrimpf, A.
2020
VoxEu
  • Ferrari, M., Mehl, A., Stracca, L.
2020
Italian Economic Journal
  • Ferrari, M.
2020
International Journal of Central Banking
  • Filardo, A. J., Lombardi, M. J., Montoro, C., Ferrari, M.
2017
Statistical implications of the new financial landscape
The benefits of using large high frequency financial datasets for empirical analyses: Two applied cases
  • Ferrari, M., Ters, K.