RESEARCH

WORKING PAPERS

Understanding how US monetary policy affects global economic conditions is of fundamental importance, as the literature shows that the effects are substantial. In this paper, I provide novel evidence on how income inequality shapes the heterogeneity of US monetary policy spillovers to GDP across foreign economies. I employ state-dependent local projections and exploit variation in disposable income inequality across a panel of 87 countries over the period 1966-2020. The empirical findings suggest that household heterogeneity significantly influences how foreign GDP responds to a US monetary policy tightening. GDP contracts two to three times more when inequality is above average. However, while higher inequality amplifies negative spillovers in advanced economies, it mitigates them in emerging markets. To rationalise this finding, I use a three-country open economy Two-Agent New Keynesian (TANK) model, which suggests that this divergence is driven by differences in participation in international financial markets. Households in emerging market economies face higher barriers to investing internationally, limiting their ability to re-balance portfolios towards higher-return bonds after the shock. This, in turn, reduces the macroeconomic effect of higher inequality on domestic conditions.Presented at: Italian Congress of Econometrics and Empirical Economics (scheduled),  PhD-EVS (scheduled), RIEF Doctoral Meetings 2025, Banca d'Italia, Banque de France, Bank of England, SNDE-IIF Workshop for Young Researchers, Trinity College Dublin, University College Dublin, Young Irish Economists Seminar Series (YIESS), 2024 IPECE Workshop.
This paper presents a novel dataset that combines granular information on financial assets from the Security Holdings Statistics (SHS) with household characteristics from the Household Finance and Consumption Survey (HFCS). We illustrate one of its potential uses by studying the link between portfolio returns and risk with education. First, we provide a non-parametric exercise taking Ireland as a case study and report a robust link between high education levels and returns. Moreover, we find that more educated households exhibit higher risk tolerance and portfolios structured to realise greater gains in periods of elevated positive risk, albeit being more susceptible to losses in challenging times. Second, we expand the illustrative example to a country panel setting and address the previous question following non-parametric as well as parametric methods. Interestingly, the previous results for education and returns also emerge in this setting. These are robust to the inclusion of unobserved conditioning factors and macro-financial controls. We outline avenues for potential research and analysis that our novel dataset may contribute to in the future.Presented at: Irish Economics Association 2024, ECB HFCN research seminar (coauthor), BdE-BIS-ECB External Statistics Conference 2024.

PEER-REVIEWED PUBLICATIONS

Inheritances matter for wealth accumulation and are often central to policy debates on wealth taxes. Using household level survey data, this paper shows that up to 2020 over one-third of households in Ireland had inherited wealth, the cumulative value of which (€97 billion) accounts for approximately one sixth of current net wealth for these households. However, the impact of inheritance extends beyond its direct value as inheritors tend to be wealthier, with a greater ownership of property. Our analysis shows that inheritances in Ireland contribute little to wealth inequality, and may even have reduced it over time, in line with existing findings for Britain and the United States. Tentative evidence suggests that mechanisms behind this wealth equalising effect may be (i) the importance of inheritances for the acquisition of property assets for middle-wealth households, (ii) the rise of asset prices, especially house prices, and (iii) substitution from employee income to rental income among inheritors.Presented at: TU Dublin (by coauthor), ECINEQ 2023, Irish Economic Association 2023, IPECE Workshop 2023, European Central Bank, Central Bank of Ireland.

Who gets the flow? Financial globalisation and wealth inequality

Journal of Macroeconomics (2024) Vol. 81, 103618  🟢Open access

🔖BibTeX 🧵Summary Thread ↗️Working Paper (2022) ↗️Poster

This paper studies whether the advent of financial globalisation has contributed to increasing wealth inequality in the United States, France, and the United Kingdom. I find that (i) positive changes in the benchmark measure of financial globalisation are associated with a positive change in the top 1% and 10% wealth shares and a negative change in the wealth share of the bottom 50% of the distribution. This is equivalent to an average gain of $1 trillion for the top 10% and $1.6 trillion for the top 1%, over the period of interest. (ii) Portfolio equities and financial derivatives appear to be the driving components behind the increase in wealth share. (iii) The implied change in wealth shares is driven by the accumulation of new financial wealth (flow) rather than the valuation of existing one. (iv) The dynamic is strengthened when a banking crisis hits the economy, possibly because people at the top of the distribution can recover their lost wealth faster than people at the bottom.  The main finding is robust to an expanded country sample, albeit reducing the historical context beyond the scope of this paper.Presented at: PennState Altoona International Conference on Empirical Economics, EconomiX PhD Conference International Macro, Royal Economic Society 2024,  FIW Research Conference 2024, EAYE 2023, JIE Summer School (Poster), YSI Pre-Conference IARIW-Bank of Italy 2023, Italian Economic Association 2022, Roma Tre University, European Economic Association 2022, Irish Economic Association 2022, Central Bank of Ireland, IPECE Workshop 2021, Trinity College Dublin.
In this paper, we assess the merits of financial condition indices (FCIs) constructed using equal weights averaging versus alternatives that use data reduction techniques, like principal components, or that allow for time-varying parameters. Our analysis is based on data for 18 advanced and emerging economies at the monthly frequency covering about 70% of the world’s GDP. We study the performance of these indicators based on their ability to capture tail risk for economic activity and to predict banking and currency crises. We find that averaging with equal weights produces FCIs that are not inferior to, and often perform better than, those constructed with more sophisticated statistical methods. For the USA and for the euro area, based on the same evaluation criteria, they also work better than two popular alternatives that receive wide attention in policy discussions, namely the Chicago Fed National Financial Conditions Index and the Composite Index of Systemic Stress.Presented at: Central Bank of Ireland, 7th RCEA Time Series Workshop, European Central Bank.

SELECTED WORK IN PROGRESS

Wealth inequality in Ireland, with Barra Roantree

POLICY PUBLICATIONS

PAPER DISCUSSIONS

The impact of changes in REER and real income on trade in goods and services by Tjeerd Boonman (Monmouth University), Ioannis Litsios (Plymouth Business School), Keith Pilbeam (City University of London), discussed at the International Conference on Empirical Economics 2024 (Penn State Altoona, virtual)


Inequality, current account imbalances and middle incomes by Océane Blomme (Université de Lille) and Jérôme Héricourt (Université Paris-Saclay), discussed at the 13th PhD Student Conference on International Macroeconomics 2024 (Université Paris Nanterre)


Cyclical transactions and wealth inequality by Jung Sakong (Chicago Fed), discussed at IARIW - Bank of Italy Conference 2023 (Naples)

PhD THESIS

Essays in International Macroeconomics and Economic Inequality

Trinity College Dublin - Defended on 25 November 2024 (no corrections)


This thesis consists of four essays at the intersection of international macroeconomics and economic inequality. Each chapter tackles important questions aimed at understanding the relevant macroeconomic dynamics between countries, the drivers of within-country wealth inequality, and the implications of their interaction. The thesis primarily consists of empirical contributions that employ various empirical methods, such as panel data models, quantile regressions, probit models, decomposition methods, and local projections. It makes use of different datasets, including macroeconomic data and household surveys.The first essay (Ch 2) studies the effectiveness and comparative performance of different approaches used to construct Financial Conditions Indices (FCIs) for a broad set of countries. The second essay (Ch 3) examines the impact of inherited wealth - inheritances and gifts - on the accumulation of household wealth and its distribution in Ireland. The third essay (Ch 4) investigates whether the advent of financial globalisation has contributed to increasing wealth inequality in the United States, France, and the United Kingdom. The fourth essay (Ch 5) explores whether household heterogeneity affects the global transmission of monetary policy.
Author: Arrigoni, SimoneAdvisor: Bénétrix, Agustín and Romelli, DavidePublisher: Trinity College Dublin. School of Social Sciences & Philosophy. Discipline of EconomicsURL: https://hdl.handle.net/2262/110445Keywords: international macroeconomics, wealth/income inequality, macroeconomics, financial conditions, inheritance, financial globalisation, monetary policy spillovers