Alberto Polo

I study a monetary model which is consistent with three salient features of the transmission of monetary policy. First, deposit rates adjust partially to changes in the Federal Funds rate. Second, banks substitute deposits with other liabilities in response to contractionary monetary policy changes. Finally, contractionary monetary policy shocks increase credit spreads, and in particular mortgage spreads. In the model, banks have market power in the deposit market, invest in long-duration assets but borrow using short-duration liabilities, and have a dividend-smoothing motive. Moreover, demand for banks' deposits has a dynamic component: it responds gradually to changes in current and past deposit rates, as in the literature on customer markets. I use the model to study the implications of imperfect pass-through to deposit rates for monetary policy transmission and find that the imperfect pass-through to deposit rates amplifies the response of output to monetary policy changes.

July 2020 version

We link tax returns across two generations to provide the first estimate of intergenerational income mobility in Italy based on administrative data. Italy emerges as less immobile than previously depicted by studies using proxies for economic status or survey data with imputation procedures. This conclusion is robust with respect to a number of common concerns when using administrative data. The expected rank of a child born from parents with income below the median is 0.44, and the probability that a child reaches the top quintile of the national income distribution starting from a family in the bottom quintile is 0.10. Upward mobility is higher for sons, first-born children, children of self-employed parents, and for those who migrate once adults. We uncover substantial geographical variation in the degree of upward mobility. Provinces in Northern Italy, the richest area of the country, display levels much higher than those in the South. This regional variation is strongly correlated with local labor market conditions, indicators of family instability, and measures of school quality.

March 2021 version

What are the quantitative implications of countercyclical labor earnings risk? This paper investigates the welfare effects of eliminating business cycles when households face cyclical changes in the skewness of the labor earnings distribution as estimated by Guvenen, Ozkan and Song (2014). Using a heterogeneous agent, general equilibrium model with aggregate shocks I find that the average welfare effect can be as large as 9% of lifetime consumption. The welfare gain comes entirely from removing cyclical changes in the distribution of persistent idiosyncratic shocks. At the individual level, the welfare gain is increasing in earnings and decreasing in wealth. Low-earnings, low-wealth households however have little to lose from countercyclical risk and prefer the economy with aggregate fluctuations.

September 2018 version