Giulia Martorana
Monetary Policy
- Division
Capital Markets/Financial Structure
- Current Position
-
Research Analyst
- Fields of interest
-
Macroeconomics and Monetary Economics,Financial Economics
- Education
- 2021-2026
PhD in Economics and Finance, Catholic University of Sacred Heart, Milan
- 2019-2021
MSc in Finance and Banking, Catholic University of Sacred Heart, Milan
- 24 February 2026
- WORKING PAPER SERIES - No. 3193Details
- Abstract
- Financial Conditions Indices (FCIs) are a widely used tool for assessing the broader monetary policy stance beyond the central bank’s direct control. This paper presents a novel vector autoregressive (VAR) model that includes key macroeconomic variables and maps financial variables into a single index, named Macro-Finance FCI. The VAR coefficients and the FCI weights are estimated jointly in one step, ensuring a model-consistent microfinance feedback. The model-implied long-run mean of the index provides a neutral benchmark to which financial conditions converge when inflation is at target and output is at potential. For the euro area, the proposed FCI incorporates nine asset prices – including risk-free rates, sovereign spreads, risk assets, and the exchange rate – and assigns a dominant role to nominal interest rates. It outperforms existing indices in out-of-sample forecasts of inflation and output. A structural identification of supply, demand, and financial shocks indicates that financial conditions require up to one year to transmit to the real economy and almost up to two years to inflation.
- JEL Code
- C32 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Time-Series Models, Dynamic Quantile Regressions, Dynamic Treatment Effect Models, Diffusion Processes
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
- 30 June 2025
- OCCASIONAL PAPER SERIES - No. 371
- 16 June 2025
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 4, 2025Details
- Abstract
- This box explores the relationship between financial market volatility and economic policy uncertainty (EPU). Historically, financial market volatility and news-based measures of EPU have displayed close co-movement, albeit diverging at times and across countries. More recently, the rise in euro area EPU has reflected an intensification of an upward trend observed over a number of years, largely driven by developments in Germany. Focusing on Germany and using a large language model, a topic-based analysis of newspaper articles identifies domestic and global uncertainties as being behind the recent surge in EPU. Moreover, in line with empirical findings for the United States, a regression analysis shows that a disconnect between financial market volatility and EPU is more likely when equity market momentum is strong, while co-movement is more likely when that momentum is weak. This interpretation is consistent with developments following the US tariff announcement on 2 April, when the spike in financial market volatility aligned with persistently high EPU levels on the back of a significant sell-off in equity markets.
- JEL Code
- D84 : Microeconomics→Information, Knowledge, and Uncertainty→Expectations, Speculations
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
G18 : Financial Economics→General Financial Markets→Government Policy and Regulation