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CEIS: CENTRE FOR ECONOMIC & INTERNATIONAL STUDIES
Furio Camillo Rosati - Director "Sovereign Spread Volatility and Banking Sector" 
CEIS Working Paper No. 454 (2019) VIVEK SHARMA, Università LUISS Guido Carli
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EDGAR SILGADO-GÓMEZ, University of Rome 'Tor Vergata'
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Using structural vector autoregression augmented with stochastic volatility (SVAR-SV), we document that in late 2000s there were large spikes in volatility of spreads on peripheral eurozone government bonds. This increased volatility entailed a significant decline in bank credit to nonfinancial sector and real economic activity. We rationalize these results in a New Keynesian dynamic stochastic general equilibrium (DSGE) model with financial intermediation. In our framework, a rise in spread volatility erodes banks’ net worth and constrains their balance sheets. The banks respond by slashing their lending to real sector, dampening the economy as a whole. Results from the model match our empirical findings. "Predictability, Real Time Estimation, and the Formulation of Unobserved Components Models"
CEIS Working Paper No. 455 TOMMASO PROIETTI, University of Rome II - Department of Economics and Finance
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The formulation of unobserved components models raises some relevant interpretative issues, owing to the existence of alternative observationally equivalent specifi
cations, differing for the timing of the disturbances and their covariance matrix. We illustrate them with reference to unobserved components models with ARMA(m;m) reduced form, performing the decomposition of the series into an ARMA(m; q) signal, q m, and a noise component. We provide a characterization of the set of covariance structures that are observationally equivalent, when the models are formulated both in the future and the contemporaneous forms. Hence, we show that, while the point predictions and the contemporaneous real time estimates are invariant to the specifi
cation of the disturbances covariance matrix, the reliability cannot be identi
fied, except for special cases requiring q < m - 1. "Real Effective Exchange Rates Determinants and Growth: Lessons from Italian Regions"
CEIS Working Paper No. 456 SILVIA CALO, Central Bank of Ireland
MARIAROSARIA COMUNALE, Bank of Lithuania - Economics Department
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In this paper we analyse the price competitiveness of the Italian regions by computing the Real Effective Exchange Rate (REER) for each region, deflated by CPI and vis-Ã -vis the main partner countries. We use them to look for the medium-term determinants, finding significant heterogeneities in the role of government consumption and investment expenditure. Government consumption has an extremely negative effect on competitiveness in North-Eastern Italy, Southern Italy and Lazio. Investment plays a negative role especially in the North-West, while it can be positive for competitiveness in Lazio and Southern Italy. We also find that the transfer theory does not necessarily hold and it even behaves in the opposite direction in case of North-Eastern Italy and Lazio. Lastly, we show that an increase in the regional price competitiveness influences regional growth positively only in the long run and spillovers may play a role. | | ^top
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Harvard Business School, SSRN, National Bureau of Economic Research (NBER), European Corporate Governance Institute (ECGI), Harvard University - Accounting & Control Unit
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