Abstract: We investigate the pass-through of a temporary value-added tax (VAT) cut on selected food products to consumer prices. Exploiting a novel dataset of daily online prices, we find that the VAT cut was fully transmitted to consumer prices, persisted throughout the policy duration, and prices returned to the pre-implementation trend after reversal. We provide evidence for two mechanisms driving this result: the policy's salience to consumers in a high-inflation environment and the decline of producer prices when implemented. We estimate that the policy reduced the inflation rate by 0.68 percentage points on impact.

Presented at: Banco de Portugal, IIES, Nova SBE, ISEG, the FED Board, ECB, Universidade do Minho, Universidade do Porto, GEE/GPEARI, the Portuguese Tax Authority, the 17th PEJ Annual Meeting, the 12th LuBraMacro Meeting, SUDSWEC 2024, the 8th Swedish Conference in Economics, and the 3rd "Portuguese Around the World: Central Banking Edition" Conference

Media Coverage: Visão, ECO, Jornal de Negócios, Observador, Público, RTP, SIC, SVT, and Sveriges Radio

Summary: Banco de Portugal's Economics in a Picture, SUERF Policy Brief, Twitter thread

[WP SSRN]  [Ungated]  [Replication Package]

Abstract: In low-fertility societies with regular immigration inflows of young workers, reducing immigration disproportionately raises dependency ratios as native populations shrink. This creates a convex policy frontier: restricting migration raises fiscal costs at an increasing rate. We quantify this mechanism using a population model combined with novel estimates of immigrants’ fiscal contributions in Euro area countries. Eliminating immigration raises the fiscal burden of aging by 16%, while doubling inflows reduces it by only 9%. The convexity generates large cross-country differences in fiscal gains from immigration, complicating common European policy design. Increasing fertility does not provide comparable relief.

Presented at: Nova SBE, U. Pompeu Fabra, Stockholm University, 15th PEJ meeting, 18th International Conference on Pension, Insurance and Saving, the 60th Public Choice Society meetings, the Lisbon Migration Economics Workshop, and the NBER Fertility and Declining Population Growth in High-Income Countries Conference; BSE Summer Forum - Workshop on Population Growth and Inequality over the Long Run; GEE/GPEARI

Media Coverage: Jornal de Negócios

Abstract: We study the effectiveness of price subsidies — implemented through lower value-added taxes — in mitigating sectoral supply shocks in the presence of non-homothetic preferences and imperfect pass-through. In our heterogeneous-agent model, sectoral shocks generate recessions in both necessity and luxury goods, with necessity recessions imposing larger costs on the bottom 30% of the income distribution. A subsidy that lowers the price of necessity goods is welfare-reducing: high-income households respond disproportionately even though these goods account for a smaller share of their consumption. In contrast, cash transfers reduce the welfare losses associated with sectoral supply shocks. Central to our findings is that the model aligns closely with the empirically observed non-homothetic behavior of households and the imperfect pass-through, which we also document.

Presented at: Nova SBE, Tehran Institute for Advanced Studies, 16th and 18th PEJ meeting, 3rd "Portuguese Around the World: Central Banking Edition" Conference, First Workshop of the ESCB network of microsimulation modeling

Abstract: How does monetary policy affect household portfolio composition? Resorting to highly granular data on the balance sheets of Norwegian households, we analyze how their wealth portfolios change in response to well-identified monetary policy shocks. We document new empirical facts about how household portfolios adjust to monetary tightening: i) total portfolio size rises initially but contracts after two years; ii) risky asset values decline, while housing wealth increases briefly before falling, with secondary residences showing a pronounced short-run rise; iii) financially active households rebalance by increasing their holdings of stocks and private-equity;  iv) decreases in risky asset values are concentrated among the wealthiest households; v) housing responses are highly heterogeneous, with richer households expanding primary and secondary housing; vi) holding adjustments vary across the wealth distribution: stock holdings increase slightly more at the top, while private-equity increases are concentrated in the tails.

Presented at: Nova SBE, LSE, IIES, University of Oslo, Sveriges Riksbank, Statistics Norway, Skatteforsk, SUDSWEC 2023, the 12th National PhD Workshop in Finance at SHoF, the 2024 RES Conference, and the 17th PEJ Annual Meeting.

Abstract: This paper studies how the long-run sectoral shift toward services of economic activity has increased the effectiveness of monetary policy in the United States. I study the role of sectoral differences between goods and services in price rigidity and in demand composition across the income distribution—two features I document in the data. I develop a two-sector heterogeneous-agent model with sector-specific nominal rigidities and non-homothetic preferences to quantify their implications for monetary policy transmission. The shift toward services between 1970 and 2019 strengthened monetary non-neutrality by 21%. As services prices are less responsive than goods prices, structural transformation raises aggregate price rigidity, flattens the Phillips curve, and amplifies the short-run transmission of monetary policy. Low-wealth households bear the largest welfare loss after a contractionary shock, with structural transformation amplifying these distributional effects. Finally, while structural transformation amplifies the impact of monetary policy shocks, it dampens the effects of supply shocks by shifting activity toward a less price-volatile sector. 

Presented at: ENTER Jamboree, PhD-EVS, the 18th Annual Meeting of the Portuguese Economic Journal, the Graduate Workshop on Heterogeneous Agent Macroeconomics, SUDSWEC 2025, the Doctoral Workshop on Quantitative Dynamic Economics, the 14th National PhD Workshop in Finance, Banco de Portugal, IIES, and U. Mannheim

[Slides]

Abstract: We show that VAT pass-through rates depend systematically on market concentration using data from 16 European countries covering 1999-2019. Low-concentration industries exhibit 40% contemporaneous pass-through to consumers, while high-concentration industries show near-zero transmission. Cross-country differences explain 72% of the variation in market concentration. This heterogeneity accounts for 16% of cross-country variation in pass-through rates.

Abstract: We argue that the relationship between wealth inequality and fiscal multipliers depends crucially on the type of fiscal experiment used as well as on the measure of the wealth distribution. We calibrate an incomplete-markets, overlapping generations model to different European economies and use Household Finance and Consumption Survey (HFCS) data to compare fiscal multipliers when models are calibrated to match the distribution of liquid vs. net wealth. We find a negative relationship between fiscal multipliers and wealth inequality when considering fiscal consolidation programs, in contrast to fiscal expansion experiments, which are standard in the literature. The underlying mechanism relies on the relationship between the distribution of wealth and the share of credit-constrained agents. We examine the role of households’ balance sheet compositions regarding asset liquidity and find that when calibrating the model to match liquid wealth, the relationship between wealth inequality and fiscal multipliers is much stronger. 

Presented at: Nova SBE, Lisbon Macro Club, and the 13th PEJ Annual Meeting