Adrien
Couturier

How does government spending stimulate the economy? We uncover a new transmis- sion channel—the sentiment channel—by showing that government spending makes firms overoptimistic about their future demand, thereby stimulating investment and output. We assemble a novel dataset linking microdata on Italian firms’ sales, sales forecasts, and public procurement contracts. Using a natural experiment that shifted public spending across municipalities, we find that an increase in government demand makes firms systematically overoptimistic about their future sales. This overoptimism is pervasive, as firms also raise their expectations about export sales. To interpret these findings, we develop a theory of expectations in which shocks to total sales make a firm overoptimistic about both its public and private sales. We embed this model of expectations in a heterogeneous-firm New Keynesian model disciplined with our causal estimates. Government spending boosts firms optimism which prompts them to invest, crowding-in investment in general equilibrium—thereby doubling the government spending multiplier. This amplification is state-dependent: our model predicts that the multiplier is a third smaller during financial crises than in recessions without financial distress.

We study how regional heterogeneity shapes the aggregate transmission of monetary policy and its distributional implications across space. We build a multi-region Heterogeneous-Agent New Keynesian model with 3,140 U.S. counties and cross- county differences in (i) intertemporal Marginal Propensities to Consume (MPCs) and (ii) non-tradable employment shares. We analytically characterize the nationwide consumption response to monetary policy in terms of the joint distribution of (i) and (ii). Using U.S. and Italian micro-data, we construct novel empirical measures of regional MPCs to validate our theory. Quantitatively, geographic heterogeneity leads to large distributional consequences of monetary policy across space and can sizably amplify its aggregate effects.

We embed diagnostic expectations into an otherwise standard incomplete-markets model of consumption-saving with idiosyncratic income risk. In this framework, households form beliefs that overweight recent income shocks, a bias we summa- rize with a sufficient statistic—sentiment—that distorts perceptions of future income. We discipline our model empirically using the Italian Survey of Household Income and Wealth. Taking advantage of a continuous-time formulation, we derive a closed- form characterization of how sentiment dampens the saving motive under optimism and amplifies it under pessimism, causing households to overreact to income shocks in their consumption-saving choices. We then show that the interaction of sentiment with borrowing constraints generates a “diagnostic poverty trap”: positive shocks fuel over-consumption rather than asset accumulation, making it harder for constrained households to escape the hand-to-mouth state. This simple behavioral friction ratio- nalizes the persistence of hand-to-mouth households observed in the data and helps match their empirical prevalence without invoking illiquid assets or preference het- erogeneity.

We develop a multi-country Heterogeneous Agents New Keynesian (HANK) model of a monetary union with ex-ante heterogeneity in legacy public debt across mem- ber states. Following symmetric aggregate shocks, the systematic monetary policy reaction induces heterogeneous responses driven by national fiscal space. This gen- erates a trade-off between union-wide macroeconomic stabilization and cross-country synchronization of economic activity for the central bank. We characterize a possibil- ity frontier between union-wide inflation stability and cross-country synchronization, which is traced out by varying the degree of the central bank’s hawkishness towards inflation. We study the role of deficit caps, fiscal and political unions, and augmented Taylor rules as instruments to navigate the stabilization-synchronization trade-off.

Ce rapport ´evalue l’impact du plan France Relance sur le PIB, l’investissement, la consommation et l’emploi, ainsi que leur r ´epartition sectorielle et distributive, `a l’aide d’un mod `ele macro ´economique de type HANK. Les r ´esultats montrent une augmentation moyenne de 0.48% du PIB par rapport `a un sc ´enario de r ´ef ´erence (soit 206 000 emplois trimestriels), tir ´ee principalement par l’investissement. Les effets sur le niveau des prix sont faibles en 2023 (hausse de 0.8% attribuable `a France Relance). Les m ´enages les plus riches, b ´en ´eficiant davantage de l’augmentation des revenus du capital, ont tir´e un gain disproportionn´e en termes de bien-ˆetre.