Dr Ruben Staffa

Dr Ruben Staffa
Current Position

since 4/23

Junior Research Affiliate

Halle Institute for Economic Research (IWH) – Member of the Leibniz Association

since 5/23

Research Associate

DIW Berlin

Research Interests

  • dynamic macroeconomics
  • financial crises
  • financial stability and banking regulation

Ruben Staffa joined the institute as a Junior Research Affiliate in April 2023. His research focuses on dynamic macroeconomics.

Ruben Staffa is a researcher in the Macroeconomics Department at DIW Berlin, where he is responsible for data infrastructure and data preparation in the forecasting unit. He received his bachelor's degree from Freie Universität Berlin, his master's degree from Goethe University Frankfurt, and his PhD from Leipzig University. At Halle Institute for Economic Research (IWH) he worked for more than four years as a research assistant in economic forecasting.

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Dr Ruben Staffa
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Publications

Working Papers

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Macroeconomic Effects from Sovereign Risk vs. Knightian Uncertainty

Ruben Staffa

in: IWH Discussion Papers, No. 27, 2023

Abstract

This paper compares macroeconomic effects of Knightian uncertainty and risk using policy shocks for the case of Italy. Drawing on the ambiguity literature, I use changes in the bid-ask spread and mid-price of government bonds as distinct measures for uncertainty and risk. The identification exploits the quasi-pessimistic behavior under ambiguity-aversion and the dealer market structure of government bond markets, where dealers must quote both sides of the market. If uncertainty increases, ambiguity-averse dealers will quasi-pessimistically quote higher ask and lower bid prices – increasing the bid-ask spread. In contrast, a pure change in risk shifts the risk-compensating discount factor which is well approximated by the change in bond mid-prices. I evaluate economic effects of the two measures within an instrumental variable local projection framework. The main findings are threefold. First, the resulting shock time series for uncertainty and risk are uncorrelated with each other at the intraday level, however, upon aggregation to monthly level the measures become correlated. Second, uncertainty is an important driver of economic aggregates. Third, macroeconomic effects of risk and uncertainty are similar, except for the response of prices. While sovereign risk raises inflation, uncertainty suppresses price growth – a result which is in line with increased price rigidity under ambiguity.

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Fiscal Policy under the Eyes of Wary Bondholders

Ruben Staffa Gregor von Schweinitz

in: IWH Discussion Papers, No. 26, 2023

Abstract

This paper studies the interaction between fiscal policy and bondholders against the backdrop of high sovereign debt levels. For our analysis, we investigate the case of Italy, a country that has dealt with high public debt levels for a long time, using a Bayesian structural VAR model. We extend a canonical three variable macro mode to include a bond market, consisting of a fiscal rule and a bond demand schedule for long-term government bonds. To identify the model in the presence of political uncertainty and forward-looking investors, we derive an external instrument for bond demand shocks from a novel news ticker data set. Our main results are threefold. First, the interaction between fiscal policy and bondholders’ expectations is critical for the evolution of prices. Fiscal policy reinforces contractionary monetary policy through sustained increases in primary surpluses and investors provide incentives for “passive” fiscal policy. Second, investors’ expectations matter for inflation, and we document a Fisherian response of inflation across all maturities in response to a bond demand shock. Third, domestic politics is critical in the determination of bondholders’ expectations and an increase in the perceived riskiness of sovereign debt increases inflation and thus complicates the task of controlling price growth.

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The Effects of Sovereign Risk: A High Frequency Identification Based on News Ticker Data

Ruben Staffa

in: IWH Discussion Papers, No. 8, 2022

Abstract

This paper uses novel news ticker data to evaluate the effect of sovereign risk on economic and financial outcomes. The use of intraday news enables me to derive policy events and respective timestamps that potentially alter investors’ beliefs about a sovereign’s willingness to service its debt and thereby sovereign risk. Following the high frequency identification literature, in the tradition of Kuttner (2001) and Guerkaynak et al. (2005), associated variation in sovereign risk is then obtained by capturing bond price movements within narrowly defined time windows around the event time. I conduct the outlined identification for Italy since its large bond market and its frequent coverage in the news render it a suitable candidate country. Using the identified shocks in an instrumental variable local projection setting yields a strong instrument and robust results in line with theoretical predictions. I document a dampening effect of sovereign risk on output. Also, borrowing costs for the private sector increase and inflation rises in response to higher sovereign risk.

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