Working Papers

Expectations and Forecasts: the Role of Strategic Interactions

[Draft coming soon] – Abstract. This paper proposes a novel approach to analyze the tests of the Full Information Rational Expectations (FIRE) hypothesis, based on the distinctions between forecasts and expectations. First, I point out that these two objects coincide under very specific conditions, and I argue that these conditions are unrealistic in the context of professional forecasting. Indirect evidence from reduced-form analyses suggests that agents might respond to strategic incentives when responding to Forecast Surveys, contaminating their use as direct measures of expectations. Second, I use this distinction to build a dynamic global game framework featuring public and private information and strategic behavior of forecasters. Endowed with a model that explicitly accounts for the evidence I provide, I aim to rationalize the evidence provided by Coibion and Gorodnichenko (2015)-type regressions.

Peace through Strength: the regional effects of Trump's military build-up  (co-authored with Edoardo Briganti)

[Draft coming soon] – Abstract. The main propagation channel of government spending shocks in both the Neo-Classical and Neo-Keynesian model is a negative wealth effect that acts through agents' anticipation of the real effects of the shocks (Woodford (2011)). The presence of forward-looking agents implies that when news of future spending reaches households, they react by increasing labor supply in response to future higher taxes. Therefore, GDP moves even before any federal dollar is spent. Nonetheless, the literature has not reached a consensus, and the role played by expectations of future government spending on current economic activity is highly debated. This paper studies Donald Trump's presidential victory in 2016  to identify a large shock to the expectations about the future path of defense spending, which hits US regions differently. It then uses this heterogeneity to investigate the effects on a series of measures of real activity. 

The missing model: individual predictability in Coibion-Gorodnichenko regressions (co-authored with Tyler Paul)

Abstract. In regressions à la Coibion-Gorodnichenko, the distinction between the consensus and individual level of analysis is first-order: while at the consensus level the empirical results are straightforward to interpret due to the theoretical guidance offered by models of information rigidities, as sticky or noisy information, at the individual level we lack such mapping from the data moments to their structural counterparts. This paper advances a more general, unified framework to interpret individual coefficients without resorting to ad-hoc behavioral or non-rational explanations.

Confidence and House Prices

[Draft coming soon] – Abstract. What share of the fluctuations in real estate prices cannot be rationalized by the most commonly imputed economic factors? How much should we care about the "animal spirits", intended as exogenous fluctuations in agents' beliefs, when studying the origination of financial crises?  The goal of this paper is to assess the role of confidence in understanding the boom-bust dynamics of credit and house prices in the United States, with a focus on the Great Financial Crisis.