Milen
Arro-Cannarsa

Job market paper · 2026

Flight to Liquidity: Monetary Policy in an Open Economy

Safe-haven economies experience global crises as a package: foreign demand for their assets surges, the currency appreciates, inflation falls, and the policy rate is driven to its lower bound. This paper adds one ingredient to an open-economy New Keynesian model, domestic assets that provide liquidity services to the rest of the world, and shows that this single addition makes foreign demand a macroeconomic shock and the supply of the liquid asset a second monetary policy instrument. A modest expansion of that supply stabilizes inflation and output exactly and prevents the liquidity trap, while pegging the exchange rate requires an operation ten times as large and sets off an inflationary boom.

SNB Working Papers 2024-06 · Swiss National Bank

Nowcasting GDP: What Are the Gains from Machine Learning Algorithms?

with Rolf Scheufele

We compare penalized regressions (LASSO, ridge, elastic net), tree ensembles (bagging, random forest, gradient boosting), and support vector regression for nowcasting Swiss GDP, using a mixed-frequency data set of more than 1,100 series that accounts for publication lags. After the Great Recession, all machine-learning methods beat the univariate benchmark by up to 28% in out-of-sample RMSE; ridge, elastic net, and SVR perform best.

Work in progress

Optimal Supply of Liquidity

I study the optimal supply of safe, liquid assets in an open economy, where the government trades off providing liquidity to domestic agents against extracting seigniorage from the rest of the world.