Cristiano Cantore

Sapienza University of Rome | la sapienza · Department of Economics and Law

We study the interaction between monetary policy and labor supply decisions at the household level. We uncover evidence of heterogeneous responses and a strong countercycli- cality of hours worked in the left tail of the income distribution, following a monetary policy shock in the U.S. and the U.K. That is, while aggregate hours and labor earnings...

We propose a novel two-agent New Keynesian model to study the interaction of fiscal policy and household heterogeneity in a tractable environment. Workers can save in bonds subject to portfolio adjustment costs; firm ownership is concentrated among capitalists who do not supply labor. The model is consistent with micro data on empirical intertempor...

The textbook New-Keynesian (NK) model implies that the labor share is pro-cyclical conditional on a monetary policy shock. We present evidence that a monetary policy tightening robustly increased the labor share and decreased real wages during the Great Moderation period in the US, the Euro Area, the UK, Australia, and Canada. We show that this is...

This paper develops a tractable capitalist-worker New Keynesian model to study the interaction of fiscal policy and household inequality. Workers can save in bonds subject to portfolio adjustment costs; firm ownership is concentrated among capitalists who do not supply labor. The model matches empirical intertemporal marginal propensities to consum...

The New-Keynesian transmission mechanism of monetary policy has clear implications for the behavior of the labor share. In the basic version of the model, the labor share is negatively related to the price markup and hence is pro-cyclical conditional on monetary policy shocks. However, little empirical evidence is available on the e�ect of monetary...

The response of hours worked to technology shocks in the postwar US economy has increased over time. We offer a structural interpretation of this important time-varying macroeconomic moment. The time varying patterns captured by a structural VAR are consistent with those obtained from a parsimonious RBC model with a less than unitary elasticity of...

The initial government debt-to-GDP ratio and the government's commitment play a pivotal role in determining the welfare-optimal speed of fiscal consolidation in the management of a debt crisis. Under commitment, for low or moderate initial government debt-to-GPD ratios, the optimal consolidation is very slow. A faster pace is optimal when the econo...

We contribute to an emerging literature that brings the constant elasticity of substitution (CES) specification of the production function into the analysis of business cycle fluctuations. Using US data, we estimate by Bayesian-Maximum-Likelihood methods a standard medium-sized DSGE model with a CES rather than Cobb-Douglas (CD) technology. We esti...

The response of hours to technology shocks is a key controversy in macroeconomics. We show that differences between RBC and NK models hinge on highly restrictive views of technology. We introduce CES production technologies and demonstrate that the response of hours depends on the factor‐augmenting nature of shocks and the capital–labor substitutio...

We analyse the effects of a government spending expansion in a dynamic stochastic general equilibrium (DSGE) model with Mortensen-Pissarides labour market frictions, deep habits and a constant-elasticity-of-substitution (CES) production function. The combination of deep habits and CES technology is crucial. The presence of deep habits enables the m...

We contribute to a recent literature on the normalization, calibration and estimation of CES production functions. The problem arises because CES 'share' parameters are not in fact shares, but depend on underlying dimensions - they are 'dimensional constants' in other words. It follows that such parameters cannot be calibrated, nor estimated unless...

We study the relationship between hours worked and technology during the postwar period in the US. We show that the responses of hours to technological improvements have increased over time, and that the patterns captured by the SVAR are consistent with those obtained from an RBC model with a less than unitary elasticity of substitution between cap...

A New-Keynesian model with deep habits and optimal monetary policy delivers a fiscal multiplier above one and the crowding-in effect on private consumption obtainable in a Real Business Cycle model à la Ravn et al. (2006). Optimized Taylor-type or price-level interest rate rules yield results close to optimal policy and dominate a conventional Ta...

We investigate the time varying relation between hours and technology shocks using a structural business cycle model. We propose an RBC model with a Constant Elasticity of Substitution (CES) production function that allows for capital- and labor-augmenting technology shocks. We estimate the model with Bayesian techniques. In the full sample, we fin...

The reaction of hours worked to technology shocks represents a key con-troversy between RBC and New Keynesian explanations of the business cycle. It sparked a large empirical literature with contrasting results. We demonstrate that, with a more general and data coherent supply and pro-duction framework ("normalized" factor-augmenting CES technology...

The link between aggregate profits and investment has been widely analysed through the impact of profits on net worth and therefore the firm’s ability to borrow, in the presence of credit market imperfections. How the business cycle is affected if profits also affect investment through an impact on savings and therefore the intermediary’s ability t...

We present a simple framework that sets the static model of credit market imperfections of Repullo and Suarez (2000) in a dynamic context. The framework allows loan supply to be an important factor in the propagation mechanism as well as the usual financial accelerator that operates through the fluctuation of net worth. We find that when both of th...

The reaction of hours worked to technology shocks has represented one of the key controversies between RBC and NK explanations of the business cycle. It sparked a large empirical literature with contrasting results. Here we introduce imperfect factor substitutability in the supply side of both a flexi-price and a sticky-price DSGE model. We show th...