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Stefano Corradin

Research

Division

Financial Research

Current Position

Principal Economist

Fields of interest

Financial Economics

Email

stefano.corradin@ecb.europa.eu

Other current responsibilities
2020

DG-Research - Principal Economist

2008-2019

DG-Research - Economist/Senior Economist

Education
2003-2008

Ph.D, Business Administration (Finance & Real Estate), May 2008. Haas School of Business, University of California, Berkeley.

1998-1999

M.A., Economics, June 1999. CORIPE, Turin.

1993-1998

Laurea, Economics, March 1998. University of Verona.

Professional experience
2001-2004

Senior Associate, Capital Allocation, Strategic Planning B.A., February 2001 - August 2004. Allianz Group (R.A.S S.p.A), Milan.

1999-2000

Associate, Capital Markets B.A., February 2000 - February 2001. Cattolica Assicurazioni, Verona.

1999-1999

Associate, Risk Management B.A., December 1999 - Jannuary 2000. Intesa Asset Management, Milan.

Teaching experience
2006-2008

Instructor for Masters in Financial Engineering program, Haas Business School, Berkeley - Software Workshops 2007-2008: MatLab for Finance.

2 May 2011
WORKING PAPER SERIES - No. 1337
Details
Abstract
Homestead exemptions to personal bankruptcy allow households to retain their home equity up to a limit determined at the state level. Households that may experience bankruptcy thus have an incentive to bias their portfolios towards home equity. Using US household data from the Survey of Income and Program Participation for the period 1996-2006, we find that especially households with low net worth maintain a larger share of their wealth as home equity if a larger homestead exemption applies. This home equity bias is also more pronounced if the household head is in poor health, increasing the chance of bankruptcy on account of unpaid medical bills. The bias is further stronger for households with mortgage finance, shorter house tenures, and younger household heads, which taken together reflect households that face more financial uncertainty.
JEL Code
G11 : Financial Economics→General Financial Markets→Portfolio Choice, Investment Decisions
K35 : Law and Economics→Other Substantive Areas of Law→Personal Bankruptcy Law
R21 : Urban, Rural, Regional, Real Estate, and Transportation Economics→Household Analysis→Housing Demand
11 July 2012
WORKING PAPER SERIES - No. 1452
Details
Abstract
I propose a life-cycle model where a finitely lived risk averse agent finances her housing investment choosing to provide a down payment. After signing the mortgage contract, the agent may strategically default and move into the rental market. Risk neutral lenders efficiently price mortgages charging a default premium to compensate themselves for expected losses due to default on a mortgage. As a result, mortgage value and amount of leverage are closely linked. An alternative is for the agent to rent the same house, paying a rent fully adjustable to house prices. The rent risk premium is set such that the agent is indifferent ex ante between owning with a mortgage and renting. Three main results arise. First, the optimal down payment and the house price volatility are positively related. The higher the house price volatility, the higher the down payment the agent provides to decrease the volatility of the equity share in the house. Second, in the presence of borrowing constraints, a higher risk of unemployment persistence and/or a substantial drop in labor income decreases the leveraged position the agent takes. Third, ruling out the effect of taking costly leverage on owning a house significantly biases the results in favor of owning over renting.
JEL Code
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
E21 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Consumption, Saving, Wealth
21 September 2012
WORKING PAPER SERIES - No. 1470
Details
Abstract
We generalize the classic Grossman and Laroque (1990) (GL) model of optimal portfolio choice with housing and transaction costs by introducing predictability in house prices. As in the GL model, agents only move to more expensive (cheaper) houses when their wealth-to-housing ratios reach an optimal lower (upper) boundary. However, in our model, these boundaries are time-varying and depend on the dynamics of the expected growth rate of house prices. We find that households moving to a more expensive house in periods of high expected growth in house prices have significantly lower ex-ante wealth-to-housing ratios than those moving in periods of low expected growth. We also find that the share of wealth invested in risky assets is lower during periods of high expected growth in house prices and that it is higher right before moving during periods of low growth. The main implications of the model are robust to tests using household level data from the PSID and SIPP surveys.
JEL Code
G11 : Financial Economics→General Financial Markets→Portfolio Choice, Investment Decisions
D11 : Microeconomics→Household Behavior and Family Economics→Consumer Economics: Theory
D91 : Microeconomics→Intertemporal Choice→Intertemporal Household Choice, Life Cycle Models and Saving
C61 : Mathematical and Quantitative Methods→Mathematical Methods, Programming Models, Mathematical and Simulation Modeling→Optimization Techniques, Programming Models, Dynamic Analysis
10 May 2013
WORKING PAPER SERIES - No. 1544
Details
Abstract
How does home ownership affect new business creation? We develop a model of career choice in the presence of liquidity constraints in which shocks to the value of real estate affect the propensity of potential entrepreneurs to borrow against the value of their property. Using a large US individual-level survey dataset over the 1996-2006 period, we show that a 10% increase in home equity raises the probability of transition into entrepreneurship by up to 14%. Our results persist when we use the topological elasticity of housing supply to generate variation in home equity that is orthogonal to entrepreneurial choice.
JEL Code
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
L26 : Industrial Organization→Firm Objectives, Organization, and Behavior→Entrepreneurship
19 November 2013
WORKING PAPER SERIES - No. 1613
Details
Abstract
This paper examines the house price dynamics for thirteen European countries. A Markov-switching error correction model is estimated on house price returns at the country level, with deviations between house prices and fundamentals feeding into the short-run dynamics. The system is assumed to be in either a stable regime, in which deviations from the long-run equilibrium tend to vanish over time, or in an unstable regime, in which no such correction takes place. The analysis yields three sets of results. First, house price returns in Europe are generally characterized by three (high, medium and low) phases; growth rates within regimes differ largely across countries. Second, for some European countries the observed high growth phases are associated with a stable regime. Third, European housing markets have been more in sync with each other since 2000 following a growing trend in the time-span 2002-2006 and a dramatic downturn after the Lehman collapse in 2008 and during the Euro area sovereign debt crisis.
JEL Code
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
R11 : Urban, Rural, Regional, Real Estate, and Transportation Economics→General Regional Economics→Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
R31 : Urban, Rural, Regional, Real Estate, and Transportation Economics→Real Estate Markets, Spatial Production Analysis, and Firm Location→Housing Supply and Markets
1 July 2016
WORKING PAPER SERIES - No. 1927
Details
Abstract
We document that a large yield spread, a basis, developed between USD- and EUR-denominated comparable bonds issued by the same euro area country over the 2008
JEL Code
G01 : Financial Economics→General→Financial Crises
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
15 February 2017
RESEARCH BULLETIN - No. 31
Details
Abstract
In periods of liquidity crises, a central bank can enlarge the group of securities that are eligible as collateral for borrowing from its facilities. All other things being equal, the price of newly eligible securities should go up, owing to the limited ability of financial institutions to borrow against them. This article provides new evidence that changes in the Eurosystem eligibility criteria had a positive price impact on targeted securities during the financial and euro area sovereign debt crisis.
JEL Code
G01 : Financial Economics→General→Financial Crises
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
19 May 2017
WORKING PAPER SERIES - No. 2065
Details
Abstract
We study how the Italian sovereign bond scarcity premia - specialness - in the repo market were affected by the European Central Bank (ECB)'s purchases during the Euro area sovereign debt crisis. We propose and calibrate a search-based dynamic model with a central bank acting as a buy-and-hold investor. Consistent with model predictions, ECB purchases drive specialness of targeted securities in combination with short-selling. Special benchmark bonds entail a positive cash premium but their market liquidity decreases when purchased by the ECB. Short-sellers were more likely to fail-to-deliver very special bonds while holders of these bonds were less inclined to pledge them as collateral to the ECB liquidity operations.
JEL Code
E43 : Macroeconomics and Monetary Economics→Money and Interest Rates→Interest Rates: Determination, Term Structure, and Effects
E51 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Money Supply, Credit, Money Multipliers
G01 : Financial Economics→General→Financial Crises
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
G23 : Financial Economics→Financial Institutions and Services→Non-bank Financial Institutions, Financial Instruments, Institutional Investors
7 November 2017
WORKING PAPER SERIES - No. 2107
Details
Abstract
This paper examines the role of collateral in the financial system, with special emphasis on the implications for financial stability and the conduct of monetary policy. First, we review what drives the demand and supply for both real and financial collateral assets. Then we examine financial stability issues and the case for regulating the use of collateral. We discuss the role and design of market infrastructures such as central clearing counterparties (CCPs). Finally, we examine the interaction of standard and non-standard monetary policy and the functioning of private collateralised markets. We show that the use of collateral is neither a sufficient nor a necessary condition for financial stability. To ensure the stability of collateralised markets a mix of micro- and macro-prudential regulation, as well as a sufficient supply of safe public assets that can be used as collateral, are needed.
JEL Code
E59 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Other
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
G18 : Financial Economics→General Financial Markets→Government Policy and Regulation
Network
Discussion papers
21 October 2020
WORKING PAPER SERIES - No. 2483
Details
Abstract
This paper analyses money market developments since 2005, and examines factors that have affected money market functioning. We consider several metrics of activity in both secured and unsecured euro area money markets, and study interactions with new Basel III regulations and with central bank policies (liquidity provision, asset purchases and the Securities Lending Programme). Using aggregate data, we document that, prior to 2015, heightened financial market volatility coincided with worsening money market conditions, while higher central bank liquidity provision was associated with reduced money market stress. After 2015, the evidence is consistent with central bank asset purchases inducing scarcity effects in some money market segments, and with active securities lending supporting money market functioning. Using transactions-level money market data combined with supervisory data, we further document that the leverage ratio regulation impacts money markets at quarter-ends due to “window-dressing” effects, reducing money market volumes and rates. We also consider the macroeconomic impact of changing money market conditions, finding that the impact depends on whether frictions originate in secured or unsecured markets and on central bank policies in place.
JEL Code
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
G20 : Financial Economics→Financial Institutions and Services→General
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
Network
Discussion papers
18 March 2021
RESEARCH BULLETIN - No. 82
Details
Abstract
Many central bank measures implemented in past years – most recently the additional longer-term refinancing operations launched by the Eurosystem at the onset of the COVID-19 pandemic – aimed inter alia at safeguarding money market conditions. This is because smoothly functioning money markets are key for the transmission of monetary policy to credit conditions in the economy. In this article we look at money market conditions in the euro area over the past 15 years and discuss the interactions between money markets, central bank policies and new Basel III regulations.
JEL Code
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
G20 : Financial Economics→Financial Institutions and Services→General
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
Network
Research Task Force (RTF)
31 May 2021
WORKING PAPER SERIES - No. 2561
Details
Abstract
We decompose euro area sovereign bond yields into five distinct components: i) expected future short-term risk-free rates and a term premium, ii) default risk premium, iii) redenomination risk premium, iv) liquidity risk premium, and a v) segmentation (convenience) premium. Identification is achieved by considering sovereign bond yields jointly with other rates, including sovereign credit default swap spreads with and without redenomination as a credit event feature. We apply our framework to study the impact of European Central Bank (ECB) monetary policy and European Union (E.U.) fiscal policy announcements during the Covid-19 pandemic recession. We find that both monetary and fiscal policy announcements had a pronounced effect on yields, mostly through default, redenomination, and segmentation premia. While the ECB's unconventional monetary policy announcements benefited some (vulnerable) countries more than others, owing to unprecedented flexibility in implementing bond purchases, the E.U.’s fiscal policy announcements lowered yields more uniformly.
JEL Code
C22 : Mathematical and Quantitative Methods→Single Equation Models, Single Variables→Time-Series Models, Dynamic Quantile Regressions, Dynamic Treatment Effect Models &bull Diffusion Processes
G11 : Financial Economics→General Financial Markets→Portfolio Choice, Investment Decisions
Network
Research Task Force (RTF)
2020
Journal of Financial Economics
The Importance of Being Special: Repo Markets During the Crisis
  • Corradin Stefano, and Maddaloni Angela
2016
Journal of Financial Intermediation
  • Corradin Stefano, Reint Gropp, Harry Huizinga and Luc Laeven
2015
Review of Financial Studies
  • Corradin Stefano and Alexander Popov
2014
Journal of Money Credit and Banking
  • Corradin Stefano
2013
Review of Financial Studies
  • Corradin Stefano, Jose Fillat and Carles Vergaraa-Alert
2010
Handbook of Short Selling, Academic Press
Do Option Prices Reveal Short-Sale Restrictions Impact on Banks? The German Case
  • Corradin Stefano, Marco Lo Duca and Sommacampagna Cristina