Marcello Miccoli Homepage

	Marcello Miccoli
	Economist, Bank of Italy Directorate General of Economics, Research and Statistics Monetary Analysis Division Via Nazionale, 91 00184 Roma, Italy marcello dot miccoli at gmail dot com	C.V. (.pdf)

Research

Can We Measure Inflation Expectations Using Twitter? (with C. Angelico, J. Marcucci and F. Quarta) - Draft arriving soon!
Abstract: Using data on Twitter and exploiting techniques of text analysis, we build a set of real-time daily indicators of inflation expectations for Italy. To study their information content, we investigate the extent to which they correlate with other measures of inflation expectations. Our Twitter-based indicators of inflation expectations are highly correlated with both monthly survey-based and daily market-based inflation expectations for Italy. Overall, they capture well the dynamics of individuals' inflation expectations and convey some additional information content beyond the existing measures. The analysis points to Twitter representing a new source of consumers' beliefs that can be both timely and accurate.
The Collateral Channel of Unconventional Monetary Policy (with M. Loberto and G. Ferrero) - Updated!
Abstract: We build a general equilibrium model - along the lines of Williamson (2012) - where financial assets can be used as collateral in secured interbank markets to obtain reserves (central bank money). In this framework frictions in the exchange process give rise to a liquidity premium to assets. An open market operation that provides reserves in exchange for assets decreases the availability of collateral, increasing its liquidity premium (and decreasing its return). The magnitude of the effect depends on assets pledgeability properties (haircuts). We explore the positive implications of the model in the data. Focusing on the period 2009 - 2014, we analyse the relation between yields of euro area government bonds and the relative amount of bonds and central banks reserves held by the euro area banking sector. We find evidence consistent with our model: yields decrease when reserves increase relative to bonds, the effect being stronger at lower levels of haircut. The results are confirmed after several robustness checks.
Optimal Dynamic Public Communication
Abstract: This paper builds a dynamic model of the information flow between partially informed financial institutions and a public agency. The financial institutions decide how to allocate their portfolio between a riskless technology with known payoff and a risky technology whose payoff is unknown. The public agency learns about the value of the unknown payoff by observing with measurement error the actions of the agents and decides when to communicate the information at the agency's disposal. The paper solves for the optimal public communication plan and shows that full transparency (meant as revelation of information every period it is collected) is not always optimal. Instead, optimal strategies involve delayed communication, the amount of delay depending in non trivial manners on the precision of private information and the size of the agency's measurement error. The reason for the result lies in the collection process of public information: while releasing information improves the welfare of the agents, it also decreases the informational content of their actions, hampering learning of the agency and reducing the benefits of future public communication.
Informational Effects of Monetary Policy (with G. Ferrero and S. Santoro)
Abstract: We analyze a simplified New-Keynesian model with an unobserved aggregate cost-push shock where firms and the central bank have different information about the shock. We consider a linear policy rule where a pure inflation targeting central bank decides how much to react to the shock given its information. In this framework we show that monetary policy serves both an allocational and an informational role, the latter coming from firms extracting information on the aggregate shock from the monetary policy tool. When the informational role is present, optimal monetary policy is more cautious, that is, it responds less to the shock than the perfect information benchmark. A more cautious reaction to the shock implies that firms use more effectively their private information and the endogenous information coming from the aggregate price in order to infer about the shock.

Policy Research

Inflation Surprise and Inflation Expectations in the Euro Area (with S. Neri)
Applied Economics, Vol. 51(6), 2019
Abstract: In the second half of 2012, euro area inflation started declining and reached historical lows at the end of 2014. Market-based measures of inflation expectations also declined to unprecedented levels. During this disinflationary period, inflation releases have often surprised analysts on the downside. We provide evidence that inflation ‘surprises’ have significant effects on inflation expectations. The sensitivity of inflation expectations to the surprises, which has varied over time, disappeared after the introduction of the Asset Purchase Programme by the European Central Bank.
link to older (very different) working paper version
Inflation Risk Premia and Risk-Adjusted Expectations of Inflation (with M. Casiraghi)
Economics Letters , Vol. 175, February 2019
Abstract: The rate of swap contracts linked to inflation can be a poor measure of inflation expectations, as it incorporates time-varying risk premia. By following an established approach, we estimate inflation risk premia and construct risk-adjusted measures of inflation expectations for the US and the euro area. Our results show that premia are negatively related to the business cycle and the volatility of the stock market, increase with the maturity of the contract and are on average lower in the US than in the euro area.
link to older (very different) working paper version
A Composite Index of Inflation Tendencies in the Euro Area (with M. Riggi, L. Rodano, L. Sigalotti)
Abstract: Assessing underlying inflation developments is crucial for a correct calibration of the monetary policy stance. To monitor the adjustment in the path of euro area inflation towards the ECBâ€™s definition of price stability, we select a number of indicators of price dynamics in the area. We then construct a composite index summarizing the information contained in those indicators by estimating several univariate probability models. The index, which provides a synthetic measure of inflationary pressures net of the most volatile components, can be interpreted as gauging the probability of inflation returning to 1.9 per cent or over within a given time horizon. Our findings, which are based on the information available in July 2017, signal that, despite the improvement in price dynamics since the beginning of the year, the adjustment of inflation rates towards levels below, but close to, 2 per cent over the medium term is still limited and far from being sustained.

Older projects

Unjamming the Public Signal: Optimal Public Communication in Learning Environments
Abstract: In a setting of diffused imperfect knowledge among agents about the fundamentals of the economy, a benevolent public authority learns about the fundamentals by observing agents' actions. In any period the public authority decides how much of its knowledge to communicate in a public signal. While public communication improves current welfare, it may hamper the authority's learning process. The public signal crowds out private information from agents' actions, which is the valuable source of learning for the public authority, leading to future less precise public communication: this is the jamming effect of public communication. Simulations of the model show that the welfare maximizing communication strategy over time can deviate from full disclosure of the public authority's information. In particular, it can be optimal to garble the public message, that is, add noise to the public signal.
Heterogeneity in Ambiguity Aversion Preferences and General Equilibrium models. (with Aaron Bodoh-Creed)
Abstract: We show that in economies where agents have heterogeneous preferences that can be represented with Hansen and Sargent's multiplier preferences form, the representative agent will not have multiplier preferences. We consider the errors induced in model outcomes if an econometrician assumes the representative agent has a multipler preferences form utility function in the context of exchange and production general equilibrium economies. We quantify the impact of these errors in terms of predictions regarding economic outcomes, asset pricing, and costs of the business cycle.
Genetics, Culture and Income Differences across Countries
Abstract: This work tries to estimate the causal effect of cultural attitudes on income dispersion across countries. Given the endogenous nature of culture with respect to economic activity, variation in genetic markers across populations is proposed as an exogenous instrument. Using cultural measure from the World Value Surveys and genetic distances from Cavalli-Sforza, Menozzi, Piazza (1994), the preliminary analysis provides evidence that cultural differences account for roughly 12% of the variation in income.