I am an assistant professor at Columbia University School of International and Public Affairs (SIPA)
My research interests include Macroeconomics, Monetary Economics, Household Finance, and Financial Intermediation
Please click here for my CV
Email: f.cirelli@columbia.edu
Twitter: @fercirelli
During the pandemic recession, firms directly exposed to the virus—i.e. the "contact" sector—contracted sharply and recovered slowly relative to the rest of the economy. Less understood is how firms that "won" by offering safer substitutes for contact sector goods have affected this unequal downturn. Using both firm and industry data, we first construct disaggregated measures of revenue growth that distinguish between contact sector losers, contact sector winners, and the noncontact sector. We show that contact sector losers contracted roughly 50 percent more than the sector average, while winners grew. We then develop a model to explain the evidence.
The high incidence of informality in the labor markets of middle-income economies challenges the provision of unemployment protection. We show that, despite informational frictions, the introduction of an unemployment insurance savings account (UISA) system may provide substantial benefits. This system improves welfare by providing insurance to the unemployed and creating incentives to work in the formal sector. The optimal scheme generates a reduction in unemployment (from 4 to 3 percent), an increase in formality (from 68 to 72 percent) and a rise in total output (by 4 percent). Overall, individuals obtain welfare gains equivalent to a 2.4 percent increase in consumption in every period.
We use transaction-level data from a major Icelandic bank—servicing about one third of the population—to study households’ portfolio allocation within liquid, short-term, safe assets—checking, savings, and brokered liquid funds—that are identical in risk, maturity, and liquidity but offer different yields. These assets are the main source of liquid financial wealth for households and the largest source of funding for banks. Despite instantaneous, costless transfers, most households barely respond to interest-rate spreads. We find that wealthy households are roughly ten times more responsive than the average, place larger shares in high-yield assets, and earn about two percentage points higher returns on their liquid portfolios than low-wealth households. Survey evidence suggests that financial literacy and inflation knowledge amplify responsiveness to interest rates. We show that business-cycle fluctuations in the share of low-rate deposits are driven primarily by active reallocation among wealthy depositors. Also, we find that standard portfolio-choice models with state- or time-dependent frictions, calibrated to match our estimated moments, are able to reproduce cross-sectional holdings but overstate households’ sensitivity to interest rates.
Qatar Centre for Global Banking and Finance at King’s Business School Young Economist Prize 2023
I study the welfare cost of anticipated inflation with an emphasis on distributional considerations. Two facts motivate my approach. First, around 60% of U.S. households are Bank-Dependent: they save all their liquid assets in bank deposits. Second, there is imperfect passthrough of market interest rates to bank deposit rates, i.e. deposit rates move less than one-to-one with market rates. As a result, high expected inflation lowers the real return on liquid savings for Bank-Dependent households, which impairs their precautionary saving capacity. I study a model of non-competitive banks along with households that vary in financial sophistication. In the model, the joint distribution of households' portfolio choices and wealth shapes demand elasticities for deposits thereby influencing banks' optimal interest rates. I use the model to explore the consequences of permanent and temporary changes in inflation. The model predicts the welfare costs of high inflation to be disproportionately borne by low- and medium-wealth households that rely on deposits to smooth consumption.
Short paper examining the impact of a CBDC on bank lending in a stylized general equilibrium model
We examine the impact of a Central Bank Digital Currency (CBDC) on bank lending, emphasizing the role of different financial frictions. Within a stylized general equilibrium model, we integrate a banking sector characterized by market power on deposits and leverage constraints, together with liquidity in households' utility. Calibrating the model to US data and simulating a CBDC introduction as a shift in households' preferences for public money, our results indicate that a CBDC increases bank lending when market power is the primary operating friction in the banking sector. However, this outcome reverses when leverage constraints are binding for banks.
