The Lira’s purchasing power from Italy’s unification to the single European Currency

This article analyses the behaviour of several price indexes over the whole life of the Italian lira (1861-1998), and for various sub-periods defined by the exchange-rate regimes of the Italian monetary history. We focus on the persistence and stationarity properties of the inflation process and their dependence on the real cycle. An international comparison with the United States and the United Kingdom further supports the conclusion that Italian inflation was abnormal as far as its mean value, degree of persistence and relationship to the real cycle are concerned. In particular, we find that the output-inflation relationship had a textbook-like, positive slope only during periods of low inflation and low production volatility

Alzheimer's disease and anaesthesia: implications for the central cholinergic system

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Uncertainty and the Dynamics of Multifactor Loadings and Pricing Errors

This paper considers an environment where investors have limited knowledge of true systematic risks and therefore continuously re-estimate the forecasting model that they use to form expectations. Based on a parsimonious specification with learning and no conditioning information, I extract time-varying factor loadings, pricing errors, and a measure of pricing uncertainty for the Fama-French three-factor model. Estimated parameters display significant fluctuations over time, both short-run and long-term, along patterns that vary across industry portfolios. Besides being markedly variable across portfolios and over time, abnormal returns and risk loadings also display strong systematic correlations with market conditions and business-cycle developments. Overall, the estimates convey the idea that over the past two decades stocks have experienced a pervasive increase in the variability of their exposure to fundamental risks

How Do Alphas and Betas Move? Uncertainty, Learning and Time Variation in Risk Loadings

I employ a parsimonious model with learning, but without conditioning information, to extract time-varying measures of market-risk sensitivities, pricing errors and pricing uncertainty. The evolution of these quantities has interesting implications for macroeconomic dynamics. Parameters estimated for US equity portfolios display significant low-frequency fluctuations, along patterns that change across size and book-to-market stocks. Time-varying betas display superior predictive accuracy for returns against constant and rolling-window OLS estimates. As to the relationship of betas with business-cycle variables, value stocks’ betas move pro-cyclically, unlike those of growth stocks. Investment growth, rather than consumption, predicts the betas of value and small-firm portfolios

Maastricht: New and Old Rules

Thanks to the Maastricht Treaty and similar arrangements, central banks nowadays enjoy considerable independence. This is generally believed to be the result of relatively recent debates, which led to the conclusion that sheltering monetary authorities from the pressures of fiscal policymakers is a prerequisite for monetary stability. However, in history this point has in fact been a recurrent tenet. We start with David Ricardo’s arguments in favour of central bank independence and against monetisation of public deficits. After WWI, the latter issue was at the heart of the 1920 International Financial Conference of the League of Nations, which fostered and guided the establishment of many new central banks, and shaped various policymaking arrangements of today’s monetary authorities