Alessandro T. Villa

Senior Economist @ChicagoFed. PhD @DukeEcon. Interested in Macroeconomics, Financial Economics, Optimal Policy and Computational Methods.

[International and Monetary Economics Network @int_mon_econ]

Super interesting!

"AI, Expectations, and Optimal Interest Rates" by Alessandro Villa.

"An AI productivity boom can warrant lower nominal rates even when most gains are anticipated. I derive analytical representations of optimal rates under commitment and discretion in an economy with sticky prices and wages and hand-to-mouth households. Holding the realized productivity path fixed, I vary expectations. Anticipated gains raise the natural rate, but below-target inflation supports real wages and keeps nominal rates lower. Surprises leave the natural rate unchanged, calling for cuts. After surprises, expected redistribution toward hand-to-mouth households calls for deeper rate cuts to sustain savers’ spending. Raising rates requires more anticipation when wages are stickier relative to prices."

https://t.co/kIfRVkXGYp

[Nicolò Ceneri @nicoloceneri]

Should entrepreneurs pay lower taxes than workers?

In a new paper with Pino, Nicolas, and @forket86, we study optimal taxation with multidimensional skills and show that in GE substantial tax breaks can be optimal for marginal entrepreneurs tempted to become workers.

[Alessandro T. Villa @forket86]

In GE, with decreasing returns, top firms can't scale to absorb all workers.

The planner needs enough entrepreneurs to sustain labor demand and wages, so it offers tax cuts—even subsidies—to marginal entrants, despite the redistribution cost.

https://t.co/1VnikxZI7u

[Alessandro T. Villa @forket86]

Households choose whether to work or become entrepreneurs, privately knowing their productivity in both occupations.

With @nicoloceneri, Pino, and Nicolas, we use lotteries to cast this multidimensional screening problem as an LP, solved using Gurobi + constraint generation.

[CEPR @cepr_org]

New CEPR Discussion Paper - DP22092
Taxing Entrepreneurs and Workers: A Linear Optimization Approach for Multidimensional Screening
Nicolo Ceneri @NYUStern, Giuseppe Lopomo @DukeU @DukeFuqua, @forket86, Nicolas Werquin @ChicagoFed
https://t.co/KrkeHJSkoQ
#CEPR_PE #EconTwitter

[Alessandro T. Villa @forket86]

How do a handful of strategic, forward-looking producers shape capital accumulation and prices?

Happy to share that our paper with Fabio Bertolotti (@EconFaber) and Andrea Lanteri (@drewkoke) is now online at the Journal of Monetary Economics!

https://t.co/ReqQ4wAtp2

[Alessandro T. Villa @forket86]

Very happy to share that our paper “Mind the Gap: The Market Price of Financial (In)Flexibility” has been accepted for publication in the Journal of Finance!
Joint work with @FilippoIppolito, Claudio Tebaldi, and @steri_roberto.

We develop a model of firm dynamics in which firms make dynamic investment and borrowing choices and face endogenous default. The key mechanism is financial inflexibility: because adjusting debt is costly, firms can remain above or below their target leverage for extended periods.

Combining the model with the data, we show that the weak empirical link between leverage and equity risk premia can be explained by leverage gaps: what matters is not simply how much debt a firm has, but also how far its leverage is from target.

[Gustavo de Souza @GusMicrotoMacro]

Excited to be organizing the Chicago Fed conference on AI and the economy next week!

Great lineup: Lawrence Schmidt, @DimitrisPapan20, @AlthoffLukas, @TaniaBabina, @avicgoldfarb, Christos Makridis, and me.

Join us at the @ChicagoFed!

https://t.co/BMK9EZZYpv

[Galo Nuño @NunoGalo]

We are hiring! Come and join the Department of Economics at @IEuniversity .

We are hiring three new Assistant / Associate professors of (Macro)Economics.

The application deadline is November 15th!

Here is the call:

https://t.co/ewErPPMdlb

[Lars Peter Hansen @UncertainLars]

The @MFRProgram, which I lead at the University of Chicago Booth School of Business, is currently hiring Research Professionals.

We’re recruiting for two positions: one starting this fall and another starting next July. If you’re interested in joining our research team, please apply here:

https://t.co/WLcgnfICR8

#EconTwitter #Macroeconomics #Finance #FinancialEconomics #MacroFinance #PreDoc #PreDoctoral

@predoc_org @UChicago

[Miguel Faria e Castro @mfariacastro]

Very nice and related to our work with @serdarozkanEN on the inflationary effects of the AI capex boom:
https://t.co/eUHwIfH8TE

[Alessandro T. Villa @forket86]

Advances in artificial intelligence appear to be driving faster productivity growth, which has important implications for how central banks set interest rates. Together with Gadi Barlevy, @JonasDMFisher, and Will Pennington, we use a theoretical framework to show that if productivity gains are anticipated, monetary policy may need to tighten to prevent overheating, while unanticipated gains could justify lowering rates. Ultimately, the response of monetary policy depends on whether productivity growth is expected or comes as a surprise, highlighting the nuanced relationship between technological progress and monetary policy.

https://t.co/LRoy5Xzd2e

#EconX #EconTwitter

[CEPR @cepr_org]

New CEPR Discussion Paper - DP21934
Causal State-Dependent Local Projections
Joel David @ChicagoFed, Raffaella Giacomini @EconUCL @ucl, Xiyu Jiao @uniofgothenburg, Weining Wang @BristolUni
https://t.co/E2gJZ6qa5L
#CEPR_MEF #EconTwitter

[Alessandro T. Villa @forket86]

New paper! We argue that, in the presence of a progressive tax system, a shift from inflationary financing to debt financing leads to debt accumulation by top earners — the saving glut of the rich.
With @Francesco_Bia, @nicoloceneri & @LeonardoMelosi
#EconTwitter #EconX

[NBER @nberpubs]

In the presence of a progressive tax system, a switch from inflationary financing to debt financing leads to debt accumulation by top earners, the saving glut of the rich, from @Francesco_Bia, @nicoloceneri, @LeonardoMelosi, and @forket86 https://t.co/A4R4XValGN

[Alessandro T. Villa @forket86]

@YuchengYang1993 @DukeEcon @DanielYiXu @dix_rafael @CosminIlut @ben_moll @JiequnH @comp_simon @JesusFerna7026 @MahdiKahou @SilvaDejanir @VytautasValait2 @drewkoke I mostly remember @VytautasValait2 oversleeping, leaving me to present both applications, then casually walking in to applause 😬

[Yucheng Yang @YuchengYang1993]

Had a fantastic time teaching a mini-course on 𝗠𝗮𝗰𝗵𝗶𝗻𝗲 𝗟𝗲𝗮𝗿𝗻𝗶𝗻𝗴 𝗳𝗼𝗿 𝗗𝘆𝗻𝗮𝗺𝗶𝗰 𝗘𝗰𝗼𝗻𝗼𝗺𝗶𝗰 𝗠𝗼𝗱𝗲𝗹𝘀 at @DukeEcon!

Thanks to @DanielYiXu @dix_rafael @CosminIlut David Berger for hosting.

🚀All slides+code are available here https://t.co/Of1RMgqFjW

[Francesco Bianchi @Francesco_Bia]

New paper is out! We connect the saving glut of the rich to the shift in the way the US finances redistribution: From imflation (unfunded) to debt backed from future taxation (funded)

[CEPR @cepr_org]

New CEPR Discussion Paper - DP21912
Fiscal Policy and the Saving Glut of the Rich
@Francesco_Bia @JohnsHopkins, @LeonardoMelosi @EUI_EU @EUI_ECO, Nicoló Ceneri @nyuniversity, Alessandro Villa @forket86 @ChicagoFed
https://t.co/TG3PbfsyIj
#CEPR_MEF #CEPR_MG #EconTwitter

[Alessandro T. Villa @forket86]

Job opening!

#EconX #EconTwitter

https://t.co/gw596ov9AL

[Alessandro T. Villa @forket86]

Following the failure of a large bank, surviving banks gain market power and rebuild its market share only gradually, keeping credit tighter and rates higher for longer. This amplifies and prolongs declines in investment, capital, and output. 5/5

[Alessandro T. Villa @forket86]

Very happy to share that my paper “Macro Shocks and Firm Dynamics with Oligopolistic Financial Intermediaries” is now out in The Review of Economic Studies!
https://t.co/6hLLQdKHPY

Grateful to @drewkoke and Lukas Schmid for their guidance and support.

#EconX #EconTwitter 1/5

[Alessandro T. Villa @forket86]

Small, growing firms have fewer financing options and higher marginal products of capital, making external finance especially valuable and credit demand less elastic. Banks can therefore charge higher financial markups, which decline as firms grow and outside options improve. 4/5