I'm a PhD candidate in Economics at Universitat Pompeu Fabra (Barcelona, Spain). My research interests are in monetary and fiscal policy. You can contact me at antonio.giribaldi@upf.edu.
I propose a new macroeconomic theory that describes how asset purchase programs implemented by central banks or governments affect asset prices and generate real economic effects. I define an asset purchase program as a government commitment to purchase Treasury bonds at an overpriced value. When the government announces the policy, financial markets price in the opportunity to sell these overpriced bonds to the government, driving bond prices up. First, I provide causal empirical evidence of a price bust in eligible Treasury bonds following Fed purchases, consistent with the hypothesis that bond prices were incorporating this resale opportunity. I then propose two theoretical frameworks for asset purchase programs. In the first theory, the government affects bond prices by committing to purchase them above the market price. In the second theory, the government issues infinitely lived bonds; by promising to reduce their supply to zero in the limit, the government induces a bubbly equilibrium, leading financial markets to price a positive bubbly component into bond prices upon announcement. For both theoretical models, I analyze optimal asset purchase programs and identify a novel policy trade-off. On the one hand, the policy is costly because the government must finance the capital gains accruing to bondholders. On the other hand, elevated bond prices allow the government to raise more debt revenue for a given volume of issuance, thereby circumventing potentially binding debt limits and facilitating tax smoothing.
Draft soon
I study how the design of optimal monetary policy depends on the endogenous response of fiscal policy, and in particular on whether the government adjusts taxes or public consumption. First, I show that, in the data, the response of fiscal variables to a monetary policy shock is not consistent with a model in which the government can adjust both taxes and public consumption. Instead, the data match well a model in which the government can adjust only public consumption. Second, I derive the optimal monetary and fiscal policy in a New Keynesian economy subject to different business cycle shocks, and I compare two scenarios: one in which the government can adjust any fiscal instrument, and one in which it can adjust only public consumption. While the first scenario is standard in the literature on optimal fiscal policy, the second scenario better fits my empirical evidence. The government, jointly with the central bank, adjusts fiscal and monetary variables both to maximize welfare and to stabilize debt, in an environment in which monetary variables affect the fiscal budget. I find that the optimal behavior of the central bank is highly sensitive to the government’s adjustment margin. For instance, if the government relies only on public consumption, the central bank should place greater weight on the goal of debt sustainability. The reason is that adjustments in public consumption, which are required to stabilize debt, are more distortive for welfare than changes in the tax rate.
I document that the implementation of quantitative easing generates a rise in Central Bank's remittances to the government. Then, I study how this change in remittances can be acknowledged as a novel channel of transmission of the unconventional monetary policy, which works by creating fiscal space for the government. I call it the "remittances' channel" and I capture it in a New-Keynesian model with heterogeneous agents. Finally, I use the model to asses the size of the remittances channel and compare it to the interest rate channel, which according to conventional wisdom is the main channel through which quantitative easing generates fiscal space. I show that under a reasonable calibration the magnitude of the remittances' channel is significant and comparable to the interest rate channel.
You can find my CV here in PDF format.