Efrem Castelnuovo

Nonlinear Effects of Monetary-Policy Shocks in the Presence of High Uncertaint

Efrem Castelnuovo, together with Giovanni Pellegrino, has estimated nonlinear VARs with US quarterly data for the post-WWII period, determining that monetary policy shocks have weaker effects on real activity and a stronger influence on inflation when macroeconomic uncertainty is high. The researchers then interpret their empirical findings via the lens of a medium-scale new-Keynesian model that is calibrated to match their VAR empirical evidence. The key finding of their study is that uncertainty times are associated to a steeper new-Keynesian Phillips curve, something which suggests a worse trade-off faced by policy-makers than in more tranquil periods.

Another paper Mr Castelnuovo is working on, jointly with Giovanni Caggiano, Silvia Delrio and Tim Robinson, is on the time-varying finance-uncertainty multiplier. This paper aims at quantifying the relevance of financial frictions in magnifying the real effects of uncertainty shocks in the US. The authors work with a time-varying parameter-VAR and find that uncertainty shocks exerted a stronger negative effect on real activity in well identified high-volatility periods, and that financial frictions played a major role in magnifying such negative effects, above all during the 2007-09 Great Recession.

Efrem Castelnuovo's research agenda centres on the role of nonlinearities for the transmission of structural shocks, the identification of common factors across countries and the empirical validation of structural DSGE models. He has published his research in a number of international journals, including the Journal of Monetary Economics, Journal of Money, Credit and Banking, Economic Journal, Journal of Applied Econometrics, Journal of Economic Dynamics and Control, Oxford Bulletin of Economics and Statistics, Macroeconomic Dynamics, Journal of International Money and Finance, and Economics Letters.

Efrem Castelnuovo works for the Department of Economics and the Melbourne Institute of Applied Economics and Social Research, University of Melbourne. Prior to joining the University of Melbourne in 2014, he held positions at the University of Padua, and taught at the Universities of Oxford, Bologna, Brescia, Rome Tor Vergata, and the Halle Institute for Economic Research. He earned a PhD in Economics from the Bocconi University (2004). He has been Associated Editor of the Journal of Applied Econometrics since 2013, Associate Editor of the Journal of Macroeconomics since 2016 and Policy Forum Editor of the Australian Economic Review since 2017.