Research

• Bank beliefs and firm lending: evidence from the Italian loan-level data, with Paolo Farroni

We use a novel loan-level dataset containing borrower-specific probability of default to accurately measure lenders’ expectations. The analysis is based on a learning model where bankers endowed with diagnostic expectations receive noisy signal about firms’ fundamentals and estimate their probability of default. The evidence suggests that banks could be subject to expectational distortions: (i) intermediaries tend to overreact to both micro and macro news, overestimating (underestimating) borrowers’ defaults after negative (positive) signals; (ii) the degree of overreaction is heterogenous among banks; (iii) overreacting bankers decrease (increase) interest rates more than rational ones and the probability of issuing a new loan rises (fall) when bankers receive positive (negative) signals. We rationalize these results with the structural estimation of a model of banking competition where banks’ profits depends on borrowers’ creditworthiness.

• Bankers expectations and monetary policy, with Simone Auer

This paper investigates bank lending expectations through the Bank Lending Survey and how they react to monetary policy announcements. 

First, we assess whether the belief formation process of banks respects the full-information-rational-expectations paradigm through testing forecast errors predictability.

Second, we study the reaction of bankers' beliefs to the ECB monetary policy announcements. Results confirm error predictability in banks' beliefs and amplification of beliefs' distortion when monetary policy announcements are perceived as pure monetary shocks. We also describe the mechanism underlying empirical findings through a macro model with risky debt and non-rational expectations showing that monetary policy innovations can amplify credit dynamics through diagnostic expectations of the lenders. 

Draft available upon request

• Inflation in the rain: weather and food prices in Italy

The study delves into the connections between weather patterns and food price inflation in Italy. Initially, I examine potential correlations between rainfall and temperature levels with aggregate prices. As a second exercise, I concentrate on the impacts of exceptional weather events. 

• Diagnostic expectations and credit constraints 

This paper aims at identifying the main effects of expectation distortions in a borrowing-saving general equilibrium model when borrowers are credit limited by collateral constraints.