The Macro Neutrality of Exchange-Rate Regimes in the presence of Exporter-Importer Firms

Revise and Resubmit at the Journal of International Economics

  2022 Best JMP Award – Special Mention of Merit

EEA and UniCredit Foundation

I characterize exchange-rate regime breaks for thirty countries between 1960 and 2019, and I establish that while they affect the volatilities of nominal and real exchange rates they do not change the volatilities of other real macro variables (output, consumption, investment, and net exports). This is true even in countries in which exports and imports represent a large component of gross domestic product. I document that current leading models of exchange rate determination cannot match these facts. I propose a model with financial frictions and exporter-importer firms which matches the behavior of nominal and real exchange rates and real macro variables across exchange-rate regimes, even for economies in which the sum of exports and imports exceeds gross domestic product.

Monetary Regimes and Real Exchange Rates: Long-Run Dynamics at the Product Level

(with Marco Mello and Jason Kim)

  November 2025

Compiling a novel dataset of product retail prices in sixteen European countries starting in 1972, we establish several facts about monetary regimes and product-level real exchange rates. The law of one price is more likely to hold under peg regimes and for tradables. Monetary regimes affect the dynamics of the product-level real exchange rates, since the negative correlation between relative prices and nominal exchange-rate fluctuations is smaller in magnitude in floating regimes than in peg regimes. Moreover, monetary-regime breaks change not only the volatility of nominal exchange rates, but also the volatility of product-level real exchange rates, leaving the volatility of relative prices unchanged. Finally, the volatility of the real exchange rates of tradables generally responds less to monetary-regime breaks than that of nontradables.

The Mussa Puzzle: A Generalization

European Economic Review, 149, October 2022

One of the most compelling pieces of evidence for monetary non-neutrality is the Mussa puzzle: the break in the monetary regime when the Bretton Woods system broke down increased the volatility of not only the nominal exchange rate but the real exchange rate. Using data covering forty-four countries from 1954 to 2019, I find that the Mussa puzzle is generalizable: any break in a monetary regime that changes the volatility of the nominal exchange rate also changes the volatility of the real exchange rate. This provides further evidence of monetary non-neutrality. 

Heterogeneous Effects of Macroprudential Policies: Cross-Country Evidence from Composite Measures

(with Lorenzo Carbonari, Alessio Farcomeni, and Giovanni Trovato)

November 2025

Using a dimension-reduction approach, we construct composite measures of macroprudential policies (MaPPs) and apply them to a panel of 119 countries over 2000–2015 to evaluate the effectiveness of MaPPs in stabilizing private credit while explicitly accounting for unobserved cross-country heterogeneity. Overall, our findings indicate that the success of macroprudential interventions depends critically on country-specific structural and financial conditions rather than on the mere adoption of policy tools. Specifically, we show that MaPPs do not exert uniform effects: depending on the macro-financial environment, they may either dampen or amplify credit volatility. Borrower-targeted measures are generally effective in low-income and moderate-leverage economies, while financial-intermediary-targeted measures display context-dependent, and occasionally procyclical, effects.

Mr. Keynes and the “Classics”; A Suggested Reconciliation

(with Gauti B. Eggertsson)

NBER Working Paper, August 2021

This paper proposes resolving the controversy between the Keynesians and the monetarists (“classics”). The dispute dates to Keynes’s book The General Theory of Employment, Interest and Money (1936)—famously formalized in Hicks’s article “Mr. Keynes and the “Classics”; A Suggested Interpretation” (1937)—and became the subject of several studies even if never reaching a definite conclusion. We first overturn existing empirical findings, relating money demand and long-term interest rates, using more recent data. We then reconcile the Keynesian and mon etarist perspectives theoretically and empirically, using New-Keynesian general-equilibrium theory and different assumptions about the underlying monetary-policy regime.