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Economic and Monetary Integration

The EMI stream investigates two key aspects of Europe’s Economic and Monetary Union (EMU): the single market and the common currency. In particular, it studies how the balance between the gains and pains from European integration depends on the design of coordinated, coherent policy approaches, or the lack thereof, in both real and monetary domains.

The research unit targets EMU’s Single Market and Common Currency, in synergy with the Achille and Giulia Boroli Chair in European Studies on the former aspect and the Intesa Sanpaolo Chair in Economics of Financial Regulation on the latter.

In line with the corresponding units of the Baffi Carefin Centre, research into the Single Market studies how different aspects of European integration affect the dynamics of industries over time, along several dimensions. It investigates the challenges emerging for policy makers with an emphasis on international trade and multinationals, competition and innovation; local development and regional imbalances; labor markets and migration, inequality and social mobility.

In parallel, research on the Common Currency reflects on the state of the relationships between monetary policy, financial supervision (micro and macro prudential) and regulation, three policies that are usually but not exclusively implemented by a central bank. It investigates emerging challenges for policymakers with an emphasis on the role of gender, the influence of psychological and behavioral biases in shaping the central bank decisions, financial integrity and sustainable finance.

CURRENT PROJECTS

Growth and productivity under COVID-19

Gianmarco Ottaviano (Bocconi University)


Uninterrupted finance of investment into intangible assets is of utmost importance for long-term productivity growth. Using data from the period of the financial crisis, we use firm-level data to show that industries more dependent on external finance cut back their intangible investments during the crisis, compared to industries that finance their investments mostly from internal sources. In contrast, tangible investments were not sensitive to the dependence on external finance. The interaction between financial frictions and intangible investment decisions, in turn, has implications for markups at the firm level, which affects the redistributional consequences of economic shocks on societies. The research project aims to further develop these results from both a theoretical and empirical point of view, in order to shed light on the potential impact of the COVID-19 shock. This research project is jointly done with Tommaso Sonno (CEP-LSE and University of Bologna).

Markups, intangibles and financial constraints

Tommaso Sonno (University of Bologna)


Uninterrupted finance of investment into intangible assets is of utmost importance for long-term productivity growth. Using data from the period of the financial crisis, we use firm-level data to show that industries more dependent on external finance cut back their intangible investments during the crisis, compared to industries that finance their investments mostly from internal sources. In contrast, tangible investments were not sensitive to the dependence from external finance. The interaction between financial frictions and intangible investment decisions, in turn, has implications for markups at the firm level, which affects the redistributional consequences of economic shocks on societies. The research project aims to further develop these results from both a theoretical and empirical point of view, in order to shed light on the potential impact of the COVID-19 shock.

Labor Market Shocks and Social Mobility

Italo Colantone (Bocconi University ), Gianmarco Ottaviano (Bocconi University )


Social mobility is fundamental feature of an efficient economic system, and the defining trait of a healthy democracy. Sustained upward social mobility might make rising levels of inequality socially acceptable, since people perceive that even children born in families at the bottom of the income distribution are given a fair chance of moving upwards. Inequality matched by a lack of social mobility, more than inequality per se, may be the ultimate source of discontent about current economic outcomes. A changing economic environment is bound to create winners and losers. Discontent becomes entrenched when winners and losers are on path-dependent trajectories within and across generations (Major and Machin, 2018, Penguin). In this research project (joint with Kohei Takeda of LSE), we investigate --both theoretically and empirically-- the effects of structural economic changes (like globalization and automation) on social mobility, and the link between inequality and social mobility.

The Green Transition: Theory and Evidence from the US

Italo Colantone (Bocconi University ), Gianmarco Ottaviano (Bocconi University ), Tom Schmitz (Bocconi University )


In this research project we investigate the local labor market effects of the green transition. As the cost of polluting rises, we observe both a compositional change in economic activity (towards cleaner activities) and a “technique effect”, i.e. firms adopting greener production technologies in order to reduce their pollution intensity. Both dynamics tend to generate distributional consequences, with a shift towards green jobs, which tend to be relatively highly skilled. Such distributional consequences may also have a spatial dimension, to the extent that local labor markets are ex-ante more or less specialized in polluting industries. We study this phenomenon through a theoretical model with heterogeneous firms, and a structural empirical analysis based on US data.

ECB, Twitter and Financial Markets: Evidence from Social Media Traffic

Donato Masciandaro (Bocconi University ), Davide Romelli (Trinity College, Dublin) and  Gaia Rubera (Bocconi University )


How does central communication affect financial markets? The aim of this project is to show that the monetary policy announcements of three major central banks, i.e. the European Central Bank, the Federal Reserve and the Bank of England, trigger significant discussions on monetary policy on Twitter. Using machine-learning techniques we identify tweets related to monetary policy around the release of monetary policy decisions and we build a metric of the similarity between the policy announcements and Twitter traffic before and after an announcement. We interpret large changes in the similarity of tweets and announcements as a proxy for monetary policy surprise and show that market volatility spikes after the announcement whenever changes in similarity are high.

Political Voice on Monetary Policy: Parliamentary Hearings and the ECB

Federico  Ferrara (LSE, London School of Economics and Political Science), Donato Masciandaro (Bocconi University ), Manuela Moschella (Scuola Normale Superiore, Pisa) and Davide Romelli (Trinity College, Dublin)


Previous scholarship on central bank accountability has generally focused on monetary authorities' actions and words while largely ignoring the other side of the accountability relationship, namely voice of politicians on monetary policy. This raises a fundamental question: what are central banks held accountable for by elected officials? To answer this question, this project will employ structural topic models on a new dataset of the Monetary Dialogues between the Members of the European Parliament (MEPs) and the President of the European Central Bank (ECB) from 1999 to 2019.

Digital Euro and Privacy: Economics and Experiments

Emanuele Borgonovo (Bocconi University),  Stefano Caselli (Bocconi University ), Alessandra Cillo (Bocconi University ), Donato Masciandaro (Bocconi University ), Giovanni Rabitti (Bocconi University )


The issuance of a public (central bank) digital currency (CBDC) is an option that both academics and central bankers are carefully considering. In this debate, given that a hypothetical CBDC can be designed in different ways, and that money digitalization may lead to a process of unbundling and re-bundling of the different properties of money, the level of privacy is a relevant issue. Then a crucial question arises: does privacy matter in shaping the demand for money? The aim of the project is to test this assertion through laboratory experiments via a methodology that combines standard techniques in eliciting individual preferences with some innovative aspects. The results will offer insights on how the different properties of money can be mixed in the construction of a digital EURO which is consistent with individual preferences.

A European Helicopter Money? Economics, Political Economy and History

Charles Goodhart (LSE, London School of Economics and Political Science), Donato Masciandaro (Bocconi University ), Stefano Ugolini (Toulouse School of Economics)


We have helicopter money when there is a lump-sum monetary transfer which produces intended central bank capital losses and/or a permanent monetary base change. This extraordinary monetary policy option appears whenever there is a significant economic crisis. But then the helicopter never flies. Political economy reasons can explain such as outcome, while history can show under which conditions such as policy where implemented in the past, during the 1630 pandemic recession in Venice. The aim of the project is to offer two separate but intertwined research output (economics and political economy, history), in order to shed light at the end about under which economic and political conditions a European helicopter money could be likely to occur.