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Stefano Corradin
Research
- Division
Financial Research
- Current Position
-
Team Lead - Economist
- Fields of interest
-
Financial Economics
- Other current responsibilities
- 2022
DG-Research - Lead Economist
- 2020-2022
DG-Research - Principal Economist
- 2008-2019
DG-Research - Economist/Senior Economist
- Education
- 2003-2008
Ph.D, Business Administration (Finance & Real Estate), May 2008. Haas School of Business, University of California, Berkeley.
- 1998-1999
M.A., Economics, June 1999. CORIPE, Turin.
- 1993-1998
Laurea, Economics, March 1998. University of Verona.
- Professional experience
- 2001-2004
Senior Associate, Capital Allocation, Strategic Planning B.A., February 2001 - August 2004. Allianz Group (R.A.S S.p.A), Milan.
- 1999-2000
Associate, Capital Markets B.A., February 2000 - February 2001. Cattolica Assicurazioni, Verona.
- 1999-1999
Associate, Risk Management B.A., December 1999 - Jannuary 2000. Intesa Asset Management, Milan.
- Teaching experience
- 2006-2008
Instructor for Masters in Financial Engineering program, Haas Business School, Berkeley - Software Workshops 2007-2008: MatLab for Finance.
- 7 October 2022
- WORKING PAPER SERIES - No. 2738Details
- Abstract
- We develop a dynamic model of a bank which finances its asset portfolio by rolling over short-term deposits with access to LOLR liquidity. Bank faces frictions in equity issuance and loan portfolio adjustments. We calibrate our model with bank’s estimated borrowing capacity at the LOLR and funding profile. We show that rollover of debt combined with access to LOLR results in a wealth transfer from private creditors to equity holders through increased dividend payments in good states, coupled with more risk-taking and defaults in bad states. The effects are stronger for banks with more fragile funding and higher maturity intermediation.
- JEL Code
- E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G32 : Financial Economics→Corporate Finance and Governance→Financing Policy, Financial Risk and Risk Management, Capital and Ownership Structure, Value of Firms, Goodwill
G33 : Financial Economics→Corporate Finance and Governance→Bankruptcy, Liquidation
G35 : Financial Economics→Corporate Finance and Governance→Payout Policy
- 21 September 2021
- OCCASIONAL PAPER SERIES - No. 270Details
- Abstract
- The financing structure of the euro area economy has evolved since the global financial crisis with non-bank financial intermediation taking a more prominent role. This shift affects the transmission of monetary policy. Compared with banks, non-bank financial intermediaries are more responsive to monetary policy measures that influence longer-term interest rates, such as asset purchases. The increasing role of debt securities in the financing structure of firms also leads to a stronger transmission of long-rate shocks. At the same time, short-term policy rates remain an effective tool to steer economic outcomes in the euro area, which is still highly reliant on bank loans. Amid a low interest rate environment, the growth of market-based finance has been accompanied by increased credit, liquidity and duration risk in the non-bank sector. Interconnections in the financial system can amplify contagion and impair the smooth transmission of monetary policy in periods of market distress. The growing importance of non-bank financial intermediaries has implications for the functioning of financial market segments relevant for monetary policy transmission, in particular the money markets and the bond markets.
- JEL Code
- E4 : Macroeconomics and Monetary Economics→Money and Interest Rates
E5 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit
G2 : Financial Economics→Financial Institutions and Services
G38 : Financial Economics→Corporate Finance and Governance→Government Policy and Regulation
- 31 May 2021
- WORKING PAPER SERIES - No. 2561Details
- Abstract
- We decompose euro area sovereign bond yields into five distinct components: i) expected future short-term risk-free rates and a term premium, ii) default risk premium, iii) redenomination risk premium, iv) liquidity risk premium, and a v) segmentation (convenience) premium. Identification is achieved by considering sovereign bond yields jointly with other rates, including sovereign credit default swap spreads with and without redenomination as a credit event feature. We apply our framework to study the impact of European Central Bank (ECB) monetary policy and European Union (E.U.) fiscal policy announcements during the Covid-19 pandemic recession. We find that both monetary and fiscal policy announcements had a pronounced effect on yields, mostly through default, redenomination, and segmentation premia. While the ECB's unconventional monetary policy announcements benefited some (vulnerable) countries more than others, owing to unprecedented flexibility in implementing bond purchases, the E.U.’s fiscal policy announcements lowered yields more uniformly.
- JEL Code
- C22 : Mathematical and Quantitative Methods→Single Equation Models, Single Variables→Time-Series Models, Dynamic Quantile Regressions, Dynamic Treatment Effect Models &bull Diffusion Processes
G11 : Financial Economics→General Financial Markets→Portfolio Choice, Investment Decisions - Network
- Research Task Force (RTF)
- 18 March 2021
- RESEARCH BULLETIN - No. 82Details
- Abstract
- Many central bank measures implemented in past years – most recently the additional longer-term refinancing operations launched by the Eurosystem at the onset of the COVID-19 pandemic – aimed inter alia at safeguarding money market conditions. This is because smoothly functioning money markets are key for the transmission of monetary policy to credit conditions in the economy. In this article we look at money market conditions in the euro area over the past 15 years and discuss the interactions between money markets, central bank policies and new Basel III regulations.
- JEL Code
- E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
G20 : Financial Economics→Financial Institutions and Services→General
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation - Network
- Research Task Force (RTF)
- 21 October 2020
- WORKING PAPER SERIES - No. 2483Details
- Abstract
- This paper analyses money market developments since 2005, and examines factors that have affected money market functioning. We consider several metrics of activity in both secured and unsecured euro area money markets, and study interactions with new Basel III regulations and with central bank policies (liquidity provision, asset purchases and the Securities Lending Programme). Using aggregate data, we document that, prior to 2015, heightened financial market volatility coincided with worsening money market conditions, while higher central bank liquidity provision was associated with reduced money market stress. After 2015, the evidence is consistent with central bank asset purchases inducing scarcity effects in some money market segments, and with active securities lending supporting money market functioning. Using transactions-level money market data combined with supervisory data, we further document that the leverage ratio regulation impacts money markets at quarter-ends due to “window-dressing” effects, reducing money market volumes and rates. We also consider the macroeconomic impact of changing money market conditions, finding that the impact depends on whether frictions originate in secured or unsecured markets and on central bank policies in place.
- JEL Code
- E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
G20 : Financial Economics→Financial Institutions and Services→General
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation - Network
- Discussion papers
- 21 October 2020
- DISCUSSION PAPER SERIES - No. 12Details
- Abstract
- This paper analyses money market developments since 2005, and examines factors that have affected money market functioning. We consider several metrics of activity in both secured and unsecured euro area money markets, and study interactions with new Basel III regulations and with central bank policies (liquidity provision, asset purchases and the Securities Lending Programme). Using aggregate data, we document that, prior to 2015, heightened financial market volatility coincided with worsening money market conditions, while higher central bank liquidity provision was associated with reduced money market stress. After 2015, the evidence is consistent with central bank asset purchases inducing scarcity effects in some money market segments, and with active securities lending supporting money market functioning. Using transactions-level money market data combined with supervisory data, we further document that the leverage ratio regulation impacts money markets at quarter-ends due to “window-dressing” effects, reducing money market volumes and rates. We also consider the macroeconomic impact of changing money market conditions, finding that the impact depends on whether frictions originate in secured or unsecured markets and on central bank policies in place.
- JEL Code
- E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
G20 : Financial Economics→Financial Institutions and Services→General
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
- 7 November 2017
- WORKING PAPER SERIES - No. 2107Details
- Abstract
- This paper examines the role of collateral in the financial system, with special emphasis on the implications for financial stability and the conduct of monetary policy. First, we review what drives the demand and supply for both real and financial collateral assets. Then we examine financial stability issues and the case for regulating the use of collateral. We discuss the role and design of market infrastructures such as central clearing counterparties (CCPs). Finally, we examine the interaction of standard and non-standard monetary policy and the functioning of private collateralised markets. We show that the use of collateral is neither a sufficient nor a necessary condition for financial stability. To ensure the stability of collateralised markets a mix of micro- and macro-prudential regulation, as well as a sufficient supply of safe public assets that can be used as collateral, are needed.
- JEL Code
- E59 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Other
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
G18 : Financial Economics→General Financial Markets→Government Policy and Regulation - Network
- Discussion papers
- 7 November 2017
- DISCUSSION PAPER SERIES - No. 4Details
- Abstract
- This paper examines the role of collateral in the financial system, with special emphasis on the implications for financial stability and the conduct of monetary policy. First, we review what drives the demand and supply for both real and financial collateral assets. Then we examine financial stability issues and the case for regulating the use of collateral. We discuss the role and design of market infrastructures such as central clearing counterparties (CCPs). Finally, we examine the interaction of standard and non-standard monetary policy and the functioning of private collateralised markets. We show that the use of collateral is neither a sufficient nor a necessary condition for financial stability. To ensure the stability of collateralised markets a mix of micro- and macro-prudential regulation, as well as a sufficient supply of safe public assets that can be used as collateral, are needed.
- JEL Code
- E59 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Other
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
G18 : Financial Economics→General Financial Markets→Government Policy and Regulation
- 19 May 2017
- WORKING PAPER SERIES - No. 2065Details
- Abstract
- We study how the Italian sovereign bond scarcity premia - specialness - in the repo market were affected by the European Central Bank (ECB)'s purchases during the Euro area sovereign debt crisis. We propose and calibrate a search-based dynamic model with a central bank acting as a buy-and-hold investor. Consistent with model predictions, ECB purchases drive specialness of targeted securities in combination with short-selling. Special benchmark bonds entail a positive cash premium but their market liquidity decreases when purchased by the ECB. Short-sellers were more likely to fail-to-deliver very special bonds while holders of these bonds were less inclined to pledge them as collateral to the ECB liquidity operations.
- JEL Code
- E43 : Macroeconomics and Monetary Economics→Money and Interest Rates→Interest Rates: Determination, Term Structure, and Effects
E51 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Money Supply, Credit, Money Multipliers
G01 : Financial Economics→General→Financial Crises
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
G23 : Financial Economics→Financial Institutions and Services→Non-bank Financial Institutions, Financial Instruments, Institutional Investors
- 15 February 2017
- RESEARCH BULLETIN - No. 31Details
- Abstract
- In periods of liquidity crises, a central bank can enlarge the group of securities that are eligible as collateral for borrowing from its facilities. All other things being equal, the price of newly eligible securities should go up, owing to the limited ability of financial institutions to borrow against them. This article provides new evidence that changes in the Eurosystem eligibility criteria had a positive price impact on targeted securities during the financial and euro area sovereign debt crisis.
- JEL Code
- G01 : Financial Economics→General→Financial Crises
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
- 1 July 2016
- WORKING PAPER SERIES - No. 1927Details
- Abstract
- We document that a large yield spread, a basis, developed between USD- and EUR-denominated comparable bonds issued by the same euro area country over the 2008
- JEL Code
- G01 : Financial Economics→General→Financial Crises
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
- 19 November 2013
- WORKING PAPER SERIES - No. 1613Details
- Abstract
- This paper examines the house price dynamics for thirteen European countries. A Markov-switching error correction model is estimated on house price returns at the country level, with deviations between house prices and fundamentals feeding into the short-run dynamics. The system is assumed to be in either a stable regime, in which deviations from the long-run equilibrium tend to vanish over time, or in an unstable regime, in which no such correction takes place. The analysis yields three sets of results. First, house price returns in Europe are generally characterized by three (high, medium and low) phases; growth rates within regimes differ largely across countries. Second, for some European countries the observed high growth phases are associated with a stable regime. Third, European housing markets have been more in sync with each other since 2000 following a growing trend in the time-span 2002-2006 and a dramatic downturn after the Lehman collapse in 2008 and during the Euro area sovereign debt crisis.
- JEL Code
- G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
R11 : Urban, Rural, Regional, Real Estate, and Transportation Economics→General Regional Economics→Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
R31 : Urban, Rural, Regional, Real Estate, and Transportation Economics→Real Estate Markets, Spatial Production Analysis, and Firm Location→Housing Supply and Markets
- 10 May 2013
- WORKING PAPER SERIES - No. 1544Details
- Abstract
- How does home ownership affect new business creation? We develop a model of career choice in the presence of liquidity constraints in which shocks to the value of real estate affect the propensity of potential entrepreneurs to borrow against the value of their property. Using a large US individual-level survey dataset over the 1996-2006 period, we show that a 10% increase in home equity raises the probability of transition into entrepreneurship by up to 14%. Our results persist when we use the topological elasticity of housing supply to generate variation in home equity that is orthogonal to entrepreneurial choice.
- JEL Code
- G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
L26 : Industrial Organization→Firm Objectives, Organization, and Behavior→Entrepreneurship
- 21 September 2012
- WORKING PAPER SERIES - No. 1470Details
- Abstract
- We generalize the classic Grossman and Laroque (1990) (GL) model of optimal portfolio choice with housing and transaction costs by introducing predictability in house prices. As in the GL model, agents only move to more expensive (cheaper) houses when their wealth-to-housing ratios reach an optimal lower (upper) boundary. However, in our model, these boundaries are time-varying and depend on the dynamics of the expected growth rate of house prices. We find that households moving to a more expensive house in periods of high expected growth in house prices have significantly lower ex-ante wealth-to-housing ratios than those moving in periods of low expected growth. We also find that the share of wealth invested in risky assets is lower during periods of high expected growth in house prices and that it is higher right before moving during periods of low growth. The main implications of the model are robust to tests using household level data from the PSID and SIPP surveys.
- JEL Code
- G11 : Financial Economics→General Financial Markets→Portfolio Choice, Investment Decisions
D11 : Microeconomics→Household Behavior and Family Economics→Consumer Economics: Theory
D91 : Microeconomics→Intertemporal Choice→Intertemporal Household Choice, Life Cycle Models and Saving
C61 : Mathematical and Quantitative Methods→Mathematical Methods, Programming Models, Mathematical and Simulation Modeling→Optimization Techniques, Programming Models, Dynamic Analysis
- 11 July 2012
- WORKING PAPER SERIES - No. 1452Details
- Abstract
- I propose a life-cycle model where a finitely lived risk averse agent finances her housing investment choosing to provide a down payment. After signing the mortgage contract, the agent may strategically default and move into the rental market. Risk neutral lenders efficiently price mortgages charging a default premium to compensate themselves for expected losses due to default on a mortgage. As a result, mortgage value and amount of leverage are closely linked. An alternative is for the agent to rent the same house, paying a rent fully adjustable to house prices. The rent risk premium is set such that the agent is indifferent ex ante between owning with a mortgage and renting. Three main results arise. First, the optimal down payment and the house price volatility are positively related. The higher the house price volatility, the higher the down payment the agent provides to decrease the volatility of the equity share in the house. Second, in the presence of borrowing constraints, a higher risk of unemployment persistence and/or a substantial drop in labor income decreases the leveraged position the agent takes. Third, ruling out the effect of taking costly leverage on owning a house significantly biases the results in favor of owning over renting.
- JEL Code
- G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
E21 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Consumption, Saving, Wealth
- 2 May 2011
- WORKING PAPER SERIES - No. 1337Details
- Abstract
- Homestead exemptions to personal bankruptcy allow households to retain their home equity up to a limit determined at the state level. Households that may experience bankruptcy thus have an incentive to bias their portfolios towards home equity. Using US household data from the Survey of Income and Program Participation for the period 1996-2006, we find that especially households with low net worth maintain a larger share of their wealth as home equity if a larger homestead exemption applies. This home equity bias is also more pronounced if the household head is in poor health, increasing the chance of bankruptcy on account of unpaid medical bills. The bias is further stronger for households with mortgage finance, shorter house tenures, and younger household heads, which taken together reflect households that face more financial uncertainty.
- JEL Code
- G11 : Financial Economics→General Financial Markets→Portfolio Choice, Investment Decisions
K35 : Law and Economics→Other Substantive Areas of Law→Personal Bankruptcy Law
R21 : Urban, Rural, Regional, Real Estate, and Transportation Economics→Household Analysis→Housing Demand
- 2020
- Journal of Financial EconomicsThe Importance of Being Special: Repo Markets During the Crisis
- 2016
- Journal of Financial Intermediation
- 2015
- Review of Financial Studies
- 2014
- Journal of Money Credit and Banking
- 2013
- Review of Financial Studies
- 2010
- Handbook of Short Selling, Academic PressDo Option Prices Reveal Short-Sale Restrictions Impact on Banks? The German Case