Work in progress
Work in progress
Overreaction in Expectations with Endogenous Feedback (2025) - Job market paper (draft available soon)
Inattention to Financial Information: The Role of Income (2025) (draft available soon)
(with Manuel Mosquera Tarrio and Alena Wabitsch)
Funded by BA/Leverhulme Grant 2023 & Joachim Herz Award 2022
Abstract
This paper aims to understand how individuals make lifecycle consumption and saving choices when facing stochastic returns on their investment and how they value information about the heterogeneous returns, conditional on their income. To address this question, we implement a permanent income model with stochastic interest rates in an experimental environment that allows for control over confounding factors such as cognitive abilities, financial literacy, risk attitudes, and initial wealth. Preliminary results suggest that (i) information improves outcomes for all agents regardless of income, and (ii) if the information is costly, high-income agents have a relatively higher valuation. The latter extends to confirming the theory of Arrow (1987), where the availability of information contributes to higher inequality. An important application of the problem is related to central bank communication: although central banks have been reducing the complexity of their communication to reach a wider audience, it is not clear whether all agents are able to use the information and benefit equally.
Forward Guidance and Credibility (2024) pdf
Abstract
This paper measures variation in central bank credibility through the level of agreement in a monetary policy committee and empirically studies its relevance for the effectiveness of forward guidance. In the European Central Bank’s (ECB) institutional framework, high-frequency identification shows that non-unanimity within the Governing Council makes financial markets doubt the credibility of their commitment to forward guidance promises. Instead, they expect a change in policy direction, regardless of the ECB promising the opposite. Reduced credibility of the commitment then dampens the effect the easing bias in communication has on expectations while confirming unanimity does not seem to reinforce it.