Filippo Occhino |

Senior Research Economist

Filippo Occhino, Senior Research Economist

Filippo Occhino is a senior research economist in the Research Department at the Federal Reserve Bank of Cleveland. His primary areas of interest are monetary economics and macroeconomics. His recent research has focused on the interaction between the risk of default in the corporate sector and the business cycle.

Before joining the Bank in 2008, Dr. Occhino was an assistant professor of economics at Rutgers University.

Born in Como, Italy, Dr. Occhino earned a bachelor’s and a master’s degree from Bocconi University of Milan, and a doctorate in economics from the University of Chicago in 2000.

  • Fed Publications
  • Other Publications
Title Date Publication Author(s) Type


2014-04 ; Margaret Jacobson; Economic Commentary
Abstract: Investment in structures is still 29 percent below its pre-recession peak. Using a new indicator of the level of structures that would be warranted by economic conditions, we find evidence that the level of investment was too high in the first half of the 2000s. This overinvestment created an overhang of structures which has held down the growth of investment in structures during the recovery.



December, 2012 Federal Reserve Bank of Cleveland, working paper no. 12-38 ; Andrea Pescatori; Working Papers
Abstract: We study optimal monetary policy in an economy where firms' debt overhangs lead to under-investment and under-production. The magnitude of this debt-induced distortion varies over the business cycle, rising significantly during recessions. When debt is contracted in nominal terms, this distortion gives rise to a balance sheet channel for monetary policy. In the presence of real and financial shocks, the monetary authority faces a trade-off between inflation and output gap stabilization. The optimal monetary policy rule prescribes that the anticipated component of inflation should be set equal to a target level, while the unanticipated component should rise in response to adverse shocks, smoothing the debt overhang distortion and the output gap.



2012-13 ; Margaret Jacobson; Economic Commentary
Abstract: Labor income has been declining as a share of total income earned in the United States for the past three decades. We look at the past effect of the labor share decline on income inequality, and we study the likely future path of the labor share and its implications for inequality.



2011-05 ; Timothy Bianco; Economic Commentary

Falling home and financial asset prices have combined to weaken the average household’s balance sheet, and this has helped to slow down the current recovery. We examine the role that household balance sheets have typically played in postwar business cycles and assess their importance in explaining why some recoveries, including the current one, have been weaker than others.



2010-7 ; Economic Commentary
Abstract: Many economists have suggested that the weakness of corporate balance sheets is constraining business spending and investment, and that this in turn is impeding growth and the recovery. High levels of debt can depress spending and investment through several channels. This Commentary explains one of them—debt overhang can cause firms to underinvest—and points to ways in which this effect might be inhibiting the recovery.



March, 2010 Federal Reserve Bank of Cleveland, Working Paper no. 1003R ; Andrea Pescatori; Working Papers
Abstract: We study the macroeconomic implications of the debt overhang distortion. In our model, the distortion arises because investment is noncontractible—when a firm borrows funds, the debt contract cannot specify or depend on the firm’s future level of investment. After the debt contract is signed, the probability that the firm will default on its debt obligation acts like a tax that discourages its new investment, because the marginal benefit of that investment will be reaped by the creditors in the event of default. We show that the distortion moves countercyclically: It increases during recessions, when the risk of default is high. Its dynamics amplify and propagate the effects of shocks to productivity, government spending, volatility, and funding costs. Both the size and the persistence of these effects are quantitatively important. The model replicates important features of the joint dynamics of macro variables and credit risk variables, like default rates, recovery rates and credit spreads.

Title Date Publication Author(s) Type
Government Debt Dynamics under Discretion


July, 2012 The B.E. Journal of Macroeconomics, Topics, 12(1), Article 19, July 2012. ; Journal Article
Abstract: This paper studies the dynamics of state-contingent government debt in the case that the fiscal authority cannot commit to a future policy. As is well known, optimal policy under commitment calls for letting debt follow a stationary process, with values that depend on the initial conditions. In contrast, when the fiscal authority lacks the ability to commit, it manipulates its policy tools, i.e. the tax rate and government spending, in order to reduce the intertemporal price of current consumption goods, i.e. the real interest rate, and the intertemporal value of its current outstanding liabilities. If the economy converges, in any steady state the government has either no incentive or no ability to reduce the real interest rate any longer.

Market Segmentation and the Response of the Real Interest Rate to Monetary Policy Shocks


November, 2008 Macroeconomic Dynamics, volume 12, issue 05, pp 591-618 ; Journal Article
Abstract: Following a contractionary monetary policy shock, the aggregate output decreases over time for six to eight quarters, while the real interest rate increases immediately and remains high for three quarters, which can hardly be replicated by models characterized by a standard consumption Euler equation. This paper adopts a segmented markets framework where some households are permanently excluded from financial markets. The monetary authority controls the short-term nominal interest rate, and lets the money supply be determined by the bond market. The aggregate output and the nominal interest rate are modeled as exogenous autoregressive processes, while the real interest rate is determined endogenously. For intermediate levels of market segmentation, the model is able to account for both the persistent decreasing path of the aggregate output and the persistent increase in the real interest rate which follow an unanticipated increase in the nominal interest rate. The sign, the size and the persistence of the responses of the real interest rate and the money growth rate are close to those in the data.

The Impact of Monetary Policy on Bond Returns: A Segmented Markets Approach


November, 2008 Journal of Economics and Business, 60(6), 485-501, November 2008 ; Bruce Mizrach; Journal Article
Abstract: This paper assesses the contribution of monetary policy to the dynamics of bond real returns. We assume that the monetary authority controls the short-term nominal interest rate.We then model exogenously the joint dynamics of the aggregate endowment and the monetary policy variable, and determine bond real returns endogenously. Market segmentation is introduced by permanently excluding a fraction of households from financial markets. When markets are segmented, monetary policy has a liquidity effect on the participants? consumption and marginal utility, on the stochastic discount factor, and on real returns. Data on bond returns strongly favor the segmented markets model over the full participation model. For maturities up to 2 years, the segmented markets model is able to replicate the sign and the size of the impulse response of bond returns to monetary policy shocks, it correctly predicts the sign of their autocorrelation, and it closely matches their volatility as a function of maturity.

Optimal Fiscal Policy when Migration Is Feasible


August 2008 The B.E. Journal of Economic Analysis & Policy, Topics, 8(1), Article 35, August 2008 ; Journal Article
Abstract: This paper investigates how the feasibility of migration affects governments’ optimal fiscal policies. We assume that households migrate toward economies where their welfare is higher, governments choose taxes and public expenditures to maximize a weighted sum of the households’ welfare, welfare is increasing in public expenditures, and only distortionary labor income taxes are available. In isolated economies, the optimal fiscal policy implies that some households are net fiscal contributors, while other households are net fiscal beneficiaries. When households can migrate, however, governments compete for the households which are net fiscal contributors and modify the fiscal policy in their favor, lowering their taxes and net fiscal contribution and increasing their welfare. The magnitude of the effect increases with the sensitivity of migration to welfare. In the limiting case of free mobility, all households are zero net fiscal contributors. As to the patterns of migration, the model predicts that, with high migration costs, all households migrate toward the same high-productivity countries, which benefits low-productivity households, whereas with low migration costs, households with different productivities migrate toward different countries, which benefits high-productivity households.

Bayesian Estimation and Evaluation of the Segmented Markets Friction in Equilibrium Monetary Models


March, 2008 Journal of Macroeconomics 30(1), 444-461, March 2008 ; John Landon-Lane; Journal Article
Abstract: This paper develops, estimates and evaluates a heterogeneous agents segmented markets model with endogenous production and a monetary authority that follows a Taylor-type interest rate rule. We find that adding the segmented markets friction significantly improves the statistical out-of-sample prediction performance of the model, and helps generate delayed and realistic impulse response functions to monetary policy shocks. The estimated segmented markets model also outperforms the standard limited participation model, both in terms of marginal likelihood and of qualitative features of the impulse response function. We estimate the fraction of households participating in financial markets to be approximately 22%.

How Much Can a Victor Force the Vanquished to Pay? France under the Nazi Boot


March, 2008 Journal of Economic History 68(1), 1-45, March 2008. ; Kim Oosterlinck; Eugene White; Journal Article
Abstract: Occupation charges paid by France to Nazi Germany represent one of the largest international transfers and contributed significantly to the German war effort. We employ a neoclassical growth model that incorporates essential features of the occupied economy to assess the welfare costs of the policies that managed the payments to Germany. Our lower bound estimates show that occupation payments required a severe cut in consumption. A draft of labor to Germany and a reduction of real wages added to this burden. Management of the accumulated domestic debt required large budget surpluses, but post-Liberation inflation slashed the real debt.

How Occupied France Financed Its Own Exploitation in World War II


May, 2007 The American Economic Review, Papers & Proceedings 97(2), 295-299, May 2007 ; Kim Oosterlinck; Eugene White; Journal Article

Existence of Equilibrium for Segmented Markets Models with Interest Rate Monetary Policies


December, 2006 The B.E. Journal of Theoretical Economics, Contributions 6(1), Article 11, December 2006 ; Journal Article
Abstract: Several studies have recently adopted the segmented markets model as a framework for monetary analysis. The characteristic assumption is that some households never participate in financial markets. This paper proves the existence of an equilibrium for segmented markets models where monetary policy is defined in terms of the short-term nominal interest rate. The model allows us to consider the important cases where monetary policy affects output, and responds to any sources of uncertainty, including output itself. The assumptions required for existence constrain the maximum value and the variability of the nominal interest rate. The period utility function is logarithmic. The proof is constructive, and shows how the model can be solved numerically. A similar proof can be used in the case that monetary policy is defined in terms of the bond supply.

Modeling the Response of Money and Interest Rates to Monetary Policy Shocks: A Segmented Markets Approach


January, 2004 Review of Economic Dynamics 7(1), 181-197, January 2004 ; Journal Article
Abstract: This paper models the dynamic response of the nominal interest rate, the money growth rate and the real interest rate to monetary policy shocks. The monetary authority controls the supply of short-term government securities directly, and the short-term nominal interest rate indirectly through open market operations. It sets the nominal interest rate as an exogenous stochastic process, and lets the money growth rate and the real interest rate be determined endogenously. Markets are segmented in the sense that some households are permanently excluded from the market in government securities. The model is able to replicate the persistent decrease in the money growth rate and the persistent increase in the real interest rate which follow an unexpected increase in the nominal interest rate. The size and the persistence of the responses are close to those in the data. Markets segmentation decreases the volatility of the money growth rate, increases the volatility of the real interest rate, and increases the persistence of both processes.