Working papers

A Static Capital Buffer Is Hard to Beat” with Matthew Canzoneri, Behzad Diba, and Arsenii Mishin, March 2023 — this paper was previously circulated with the title “Optimal Dynamic Capital Requirements and Implementable Capital Buffer Rules.”

The Elusive Gains of Nationally Oriented Monetary Policy” with Martin Bodenstein and Giancarlo Corsetti, February 2023.

The Information Content of Stress Test Announcements” with Michele Modugno. December 2022. 

“Optimal monetary policy with endogenous financial intermediation” with Jinill Kim, 2019.

Older but not forgotten

Can macro variables used in stress testing forecast the performance of banks?” with Michelle Welch, 2012.

Oil Efficiency, Demand, and Prices: a Tale of Ups and Downs” with Martin Bodenstein, 2011.


There is a tenuous predictive relationship between the ratio of nonfinancial credit to GDP and GDP two years ahead. Setting bank capital requirements following a simple rule based on the credit-to-GDP ratio is not a good idea in our model even if the model encapsulates a predictive relationship in line with the observed data.

A Static Capital Requirement is Hard to Beat

with Matt Canzoneri, Behzad Diba and Arsenii Mishin — latest version March 2023

Rules that respond to cyclical conditions fail to prevent excessive risk taking, whereas a static capital buffer performs nearly as well as the Ramsey rule.

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NFA refers to net foreign assets. When international financial markets are incomplete, as modeled by imposing that only non-state-contingent bonds are traded across countries, the gains from cooperation increase in the size of the outstanding NFA.

The Elusive Gains of Nationally Oriented Monetary Policy

With Martin Bodenstein and Giancarlo Corsetti

We show that when assessed conditionally on empirically relevant economic developments, the welfare cost of moving away from regimes of explicit or implicit cooperation between two countries for monetary policy may rise to multiple times the cost of economic fluctuations. 


The Information Content of Stress Test Announcements

with Michele Modugno

By examining the reaction of different asset prices, we find evidence that market participants value the stress test announcements not only for the information on possible future capital distributions but also for the signals about bank resilience. These results back the use of stress tests by central banks to inform the broader public about the soundness of the banking system.