Alessio's research interests revolve around issues of sustainable economic growth, European economic and monetary union, political economy, macroeconomic adjustment, and structural reforms. Methodologically, he is particularly interested in technical ways to reconcile country-specificity with cross-country evidence and policy recommendations.
Journal of New Finance, Vol. 2, No. 1, 2021.
VoxEU version here.
Abstract: Inspired by conspicuous historical parallels, some scholars and journalists have recently postulated that GDP growth and productivity might boom in the aftermath of the Covid-19 pandemic. This paper reviews the evidence for and against the ‘Roaring 20s’ hypothesis, concluding that some countries might experience a forceful economic expansion, possibly fueled by pent-up demand, compounding a successful digital and green transition, or leveraging an export-led model. However, a strong prolonged economic bonanza is unlikely to materialise evenly across the EU. An uneven recovery would acquiesce imbalances within the Union, and especially the euro area. As such, policymakers should avoid complacency, and make the most of the Recovery and Resilience Facility funds, combining them with wide-reaching structural reforms, to improve economic prospects for the decade to come.
Abstract: The ambitious carbon-reduction targets set out by the Paris Agreement, or by recent Green Deals such as the one launched by European Commission President Ursula von der Leyen, will require a high degree of engagement with the public. This is true not only as important changes in lifestyle are going to be needed from citizens, especially in developed economies, but also because top-down measures will need public approval to be put in place. This paper reviews literature from behavioural and environmental economics, cognitive sciences, (social) psychology, health policy, and marketing to condense key insights on how to make communication on the green transition more effective in terms of citizens’ engagement. In doing so, it distils six policy recommendations that can serve as building blocks for an impactful narrative accompanying decarbonisation strategies, in Europe and beyond. If used skilfully, an effective communication and consequent behavioural change holds the promise of complementing top-down financial and regulatory tools, accelerating the green transition.
Abstract: Macroeconomic adjustment in the euro area periphery was more recessionary than pre-crisis imbalances would have warranted. To make this claim, this paper proposes a novel use of a Propensity Score Matching Model to produce counterfactuals for the Eurozone crisis countries (Greece, Portugal, Ireland, Cyprus, Spain) based on over 200 past macroeconomic adjustment episodes between 1960 and 2010 worldwide. At its trough, between 2010 and 2015 per capita GDP had contracted on average 11 percentage points more in the Eurozone periphery than in the standard counterfactual scenario. These results are not dictated by any specific country experience, are robust to a battery of alternative counterfactual definitions, and stand confirmed when using alternative estimation strategies, such as a Synthetic Control Model or a parametric dynamic panel regression model. Zooming in on the potential causes, the lack of an independent monetary policy, while having contributed to a deeper recession, does not fully explain the Eurozone's specificity, which is instead to be traced back to a sharper-than-usual contraction in investment and fiscal austerity due to high funding costs. These insights lend empirical backing to the proponents of more wide-reaching reforms of the Eurozone architecture, aimed at preventing some of these developments from repeating themselves.
Link to dataset here.
Responses to the Euro Area crisis: Measuring the path of European Institutional Integration (with Francesco Mongelli, Ettore Dorrucci, and Demosthenes Ioannou)
Journal of European Integration, Vol. 37/7, pp. 769-786, 2015.
Abstract: The euro area crisis has exposed flaws in the institutional framework of the European Economic and Monetary Union (EMU). The immediate causes of the crisis have been widely debated — including weak governance, persistent erosion of competitiveness in some countries and easy financing by banks. However, there is little discussion about a fundamental shift in the nature of European integration, which took place in mid-1990s when plans for launching the euro became credible and binding. It was not understood that Europe had shifted from a Common Market Era, during which EMU’s foundations were laid, to a ‘Union Era’ which in retrospect exhibited an incomplete institutional framework. This article reviews the leap in governance now taking place, whilst taking stock of what has worked and proved resilient over the previous 60 years. This is done by means of an index — the European Index of Regional Institutional Integration (EURII) — providing a tool to synthesise and monitor European institutional integration since 1958, and track all institutional reforms since 2010. EURII has both backward as well as forward-looking components anchored on the project put forward in the 2012 Four Presidents’ Report.
Link to dataset here.
Abstract: Setting a country’s structural growth rate on a higher path, i.e. sparking and sustaining a growth acceleration can have quantitatively huge implications for national income and, more broadly, for people’s wellbeing. We develop a novel statistical framework to identify systematically the set of binding constraints that were unlocked before the 135 growth acceleration episodes that took place between 1962 and 2002 worldwide. We employ this information to characterise the acceleration process, which tends to be preceded by a deep recession and major economic policy changes. Once we combined this information with a set of counterfactual analyses, we find however that successful acceleration strategies should not contain off-the-shelf approaches or necessarily all-encompassing “shock therapy” solutions. On the other hand, they call for a careful tailoring to local conditions. Richer countries tend to experience fewer accelerations, but once these have been ignited, they are better positioned to make the most out of them. Despite standard growth determinants doing a fairly good job at characterising successful accelerations, we note how take-offs remain extremely hard to engineer with a high degree of certainty.
Structural reform waves and economic growth (with Pasquale Marco Marrazzo)
ECB Working Paper No. 2111, 2017.
Abstract: At a time of slow growth in several advanced and emerging countries, calls for more structural reforms are multiplying. However, estimations of the short- and medium-term impact of these reforms on GDP growth remain methodologically problematic and still highly controversial. We contribute to this literature by making a novel use of the non-parametric Synthetic Control Method to estimate the impact of 23 wide-reaching structural reform packages (including both real and financial sector measures) rolled out in 22 countries between 1961 and 2000. Our results suggest that, on average, reforms started having a significant positive effect on GDP per capita only after five years. Ten years after the beginning of a reform wave, GDP per capita was roughly 6 percentage points higher than the synthetic counterfactual scenario. However, average point estimates mask a large heterogeneity of outcomes. Benefits tended to materialise earlier, but overall to be more limited, in advanced economies than in emerging markets. These results are confirmed when we use a parametric dynamic panel fixed effect model to control for the rich dynamics of GDP, and are robust to a variety of alternative specifications, placebo and falsification tests, and to different indicators of reform.
The long road towards the European single market (with Mario Mariniello and André Sapir)
Bruegel Working Paper No. 2015/01, 2015.
Bruegel blog post version here.
Abstract: The single market is often perceived as the panacea for Europe’s economic troubles. It is believed that completing the single market would boost welfare, stimulate growth and increase European competitiveness. However, identifying and quantifying the channels through which market integration is expected to engender growth is methodologically complex. Although the overwhelming prediction from the literature is for single market integration to generate positive and significant aggregate effects, we conclude that the impact so far has fallen short of initial expectations, because: (1) Barriers continue to prevail in the EU, preventing the exploitation of the potential benefits of full market integration; (2) ‘Complementary policies’ to support the single market were not, or were insufficiently, put in place; (3) The single market project has not sufficiently been framed as a key part of the process of creative destruction that Europe needs to embrace to successfully modernise its economy. That single market integration generates positive and significant aggregate effects does not imply that its effects are positive and significant for every sector. There is therefore an important role for European Union and national distributional policies to ensure that losers are sufficiently compensated by the winners, and to overcome political resistance to completing the single market.
The political economy of financial crisis policy (with Mícheál O’Keeffe)
Bruegel Working Paper No. 2015/06, 2015.
Abstract: We employ cross-country econometric evidence from all crisis episodes in the period 1970-2011 to examine the impact political and party systems have on the fiscal cost of financial sector intervention. Governments in presidential systems are associated with lower fiscal costs of crisis management because they are less likely to use costly bank guarantees, thus reducing the exposure of the state to significant contingent and direct fiscal liabilities. Consistent with these findings we find further evidence that these governments are less likely to use bank recapitalisation and more likely to impose losses on depositors.
Changing trade patterns, unchanging European and global governance (with Jim O'Neill)
Bruegel Working Paper No. 2014/02, 2014.
Bruegel blog post here.
Abstract: The world economy is going through its biggest transformation in a relatively short space time. There have been many explanations for this phenomenon but the unprecedented scale and pace of this change and, most crucially, its implications, still seems little understood. In turn, there has been little preparation for, or adjustment to, this changing world, though if the change continues at this pace, the effectiveness of many global institutions in their current form will be threatened. We highlight the dramatic degree of the shifts taking place in world GDP and trade and include fresh projections of what world trade patterns might look like in 2020, should the trends observed over the past decade to continue. We also show the resulting shift in trade relationships for many key countries. European member states tend to have quite different trading partners’ profiles, and this heterogeneity is quite likely to become more pronounced with time. This, in turn, suggests a significant challenge for the effective functioning of the euro area and weakens the original rationale of its creation. If our projections to 2020 are broadly right, then many established frameworks for the running of the world economy and its governance are not going to be fit for purpose, and will need to change. The global monetary system itself, and global organisations such as the IMF, G7, and G20 are going to have to adapt considerably if they want to remain legitimate representatives of the world order. The alternative is their relegation to irrelevance.