Francesco Zanetti

Francesco Zanetti
Associate Professor in Economics
Wadham College
01865 271956
francesco.zanetti@economics.ox.ac.uk

Francesco Zanetti is an Associate Professor in the Department of Economics at the University of Oxford and the David Richards Fellow of Wadham College. He holds a PhD in Economics from Boston College, and a PhD in Economic Theory and Institutions from the University of Bologna. Before joining Oxford in September 2012, he spent eight years in the Bank of England, first as an Economist, Senior Economist and Advisor in the Monetary Analysis Section. He is a visiting scholar at the Bank of International Settlements, the Bank of England and provided technical support and training to more than forty central banks around the world. He held visiting teaching positions at the London School of Economics, London Business School, and the joint IMF Vienna Institute. 

His research interests are in the fields of Macroeconomics, Monetary Economics and Applied Econometrics. Among other topics, he has worked on labor market dynamics and the effect of structural reforms, the propagation of news shocks, the state dependence of fiscal multipliers, and the impact of unconventional policies. He is a recipient of the British Academy Mid-Career Fellowship for the academic year 2020-2021. His past research was supported by the British Academy, Leverhulme Foundation, the Australian Research Cancil, the Zengin Foundation, and the John Fell Fund. He serves as an associate editor for the Economic Journal, Journal of Money, Credit and Banking, Oxford Bulletin of Economics and Statistics, Oxford Economic Papers, as a co-editor for Macroeconomic Dynamics, and as a member of the editorial board for Central Bank Review. His research has appeared in leading academic journals and policy forums.

 

Personal site

  • STATE DEPENDENCE IN LABOR MARKET FLUCTUATIONS

    August 2020
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    Journal article
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    INTERNATIONAL ECONOMIC REVIEW

  • Changing Macroeconomic Dynamics at the Zero Lower Bound

    July 2019
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    Journal article
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    JOURNAL OF BUSINESS & ECONOMIC STATISTICS
    Change-point VAR model, Global financial crisis, Large-scale asset purchases

  • FINANCIAL SHOCKS, JOB DESTRUCTION SHOCKS, AND LABOR MARKET FLUCTUATIONS

    April 2019
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    Journal article
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    MACROECONOMIC DYNAMICS
    Business Cycle, Labor Market Frictions, Financial Shocks, Job Destruction Shocks

  • On Quality and Variety Bias in Aggregate Prices

    September 2018
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    Journal article
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    JOURNAL OF MONEY CREDIT AND BANKING
    firm's entry and exit, product quality, product variety

  • Optimal Monetary Policy and Fiscal Policy Interaction in a Non-Ricardian Economy

    June 2018
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    Journal article
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    INTERNATIONAL JOURNAL OF CENTRAL BANKING
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  • Department of Economics Discussion Paper Series

    STATE DEPENDENCE OF FISCAL MULTIPLIERS: THE SOURCE OF FLUCTUATIONS MATTERS

    December 2020
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    Working paper
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    Department of Economics Discussion Paper Series
    We develop a general theory of state-dependent fiscal multipliers in a framework featuring interaction between two empirically relevant goods market frictions: idle productive capacity and unsatisfied demand. Our key novel finding is that the source of economic fluctuations determines the cyclicality of fiscal multipliers. Policies that stimulate aggregate demand, such as government spending and consumption tax cuts, have multipliers that are large in demand-driven recessions, but small and possibly negative in supply-driven downturns. On the other hand, policies that boost aggregate supply, such as cuts in taxes on labor income and firms’ payroll and sales, are ineffective in demand-driven recessions, but powerful if the downturn is driven by supply factors. Spending austerity, implemented by a reduction in government consumption, can be the policy with the largest multiplier in severe supply-side recessions and demand-driven booms, provided elasticities of labor demand and supply are sufliciently low. We obtain model-free empirical support for our theoretical predictions by using a novel econometric specification that allows us to estimate spending and tax cut multipliers in recessionary and expansionary episodes, conditional on those being either demand- or supply-driven.
    business cycle, fiscal multipliers, state dependence, search-and-matching in the goods market
  • Department of Economics Discussion Paper Series

    Vintage Article: The Effect of Monetary Policy Shocks in the United Kingdom: an External Instruments Approach

    September 2020
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    Working paper
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    Department of Economics Discussion Paper Series
    This paper uses VAR analysis to identify monetary policy shocks on U.K. data using surprise changes in the policy rate as external instruments and imposing block exogeneity restrictions on domestic variables to estimate parameters from the viewpoint of the domestic economy. The results show large and persistent effects of monetary policy shocks on the domestic economy and point to the critical role of exchange rates and term premia. The analysis resolves important empirical puzzles of traditional recursive identification methods. Revised September 2020
    Monetary Policy Transmission, Structural VAR, Small Open Economy, External Instruments Identification
  • Department of Economics Discussion Paper Series

    Monetary Policy, Firm Heterogeneity, and Product Variety

    September 2020
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    Working paper
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    Department of Economics Discussion Paper Series
    This study provides new insights on the allocative effect of monetary policy. It shows that contractionary monetary policy exerts a non-trivial reallocation effect by cleansing unproductive firms and enhancing aggregate productivity. At the same time, however, reallocation involves a reduction in the number of product variety that is central to consumer preferences and hurts welfare. A contractionary policy prevents the entry of new firms and insulates existing firms from competition, reducing aggregate productivity. Under demand uncertainty, the gain of the optimal monetary policy diminishes in firm heterogeneity and increases in the preference for product variety. We provide empirical evidence on US data, which corroborates the relevance of monetary policy for product variety that results from firm entry and exit, and provides limited support to the cleansing effect of monetary policy.
    Monetary policy, firm heterogeneity, product variety, reallocation
  • Department of Economics Discussion Paper Series

    State Dependence in Labor Market Fluctuations

    February 2020
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    Working paper
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    Department of Economics Discussion Paper Series
    This paper documents state dependence in labor market fluctuations. Using a Threshold Vector Autoregression model (TVAR), we establish that the unemployment rate, the job separation rate, and the job finding rate exhibit a larger response to productivity shocks during periods with low aggregate productivity. A Diamond-Mortensen-Pissarides model with endogenous job separation and on-the-job search replicates these empirical regularities well. We calibrate the model to match the standard deviation of the job-transition rates explained by productivity shocks in the TVAR, and show that the model explains 88 percent of the state dependence in the unemployment rate, 76 percent for the separation rate and 36 percent for the job finding rate. The key channel underpinning state dependence in both job separation and job finding rates is the interaction of the firm’s reservation productivity level and the distribution of match-specific idiosyncratic productivity. Results are robust across several variations to the baseline model.
    Search and Matching Models, State Dependence in Business Cycles, Threshold Vector Autoregression
  • Department of Economics Discussion Paper Series

    Imperfect Information, Shock Heterogeneity, and Inflation Dynamics

    September 2019
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    Working paper
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    Department of Economics Discussion Paper Series
    We establish novel empirical regularities on firms’ expectations about aggregate and idiosyncratic components of sectoral demand using industry-level survey data for the universe of Japanese firms. Expectations of the idiosyncratic component of demand differ across sectors, and they positively co-move with expectations about the aggregate component of demand. To study the implications for inflation, we develop a model with firms that form expectations based on the inference of distinct shocks from a common signal. We show that the sensitivity of inflation to changes in demand decreases with the volatility of idiosyncratic component of demand that proxies the degree of shock heterogeneity. We apply principal component analysis on Japanese sectoral-level data to estimate the degree of shock heterogeneity, and we establish that the observed increase in shock heterogeneity plays a significant role for the reduced sensitivity of inflation to movements in real activity since the late 1990s.
    Imperfect information, Shock heterogeneity, Inflation dynamics
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