Research

Working Papers

Under review: "The Sovereign-Bank Nexus and the Inflation Channel" with Qingqing Cao & Raoul Minetti.
We show that the sovereign-bank nexus comprises an additional channel: inflation. When the sovereign attempts to resolve a sovereign debt crisis through debt monetization, the higher inflation induces a deterioration of banks' capital position because of the maturity mismatch of banks' assets and liabilities. Quantitative analysis reveals that the elasticity of banking capital to long-term inflation expectations is high, as a 1\% increase to long-term inflation expectations leads to a 15\% decrease in banks' Tier 1 capital.

Under review: "When Does Finance Help Trade? Financial Development, Financial Heterogeneity, and Export" with Raoul Minetti & Pierluigi Murro.
Credit sectors differ in depth and composition. We study financial development in an industry model of trade where the credit sector is heterogeneous and banks specialize in firm domestic or foreign activities. Internationally oriented banks encourage exports. Local banks’ expansion democratizes export by allowing financially vulnerable firms to enter foreign markets. However, it also fragments the export sector, inducing financially strong exporters to focus on domestic markets by reducing export intensities. Model calibration reveals that, in aggregate, local financial development can moderate inter-firm inequalities driven by internationalization while reducing trade flows. The predictions are consistent with evidence from Italian microdata.