We develop a multi-country general equilibrium model featuring (i) migration flows across borders; (ii) explicit supply chain networks both across sectors and across countries; (iii) services sector with a significant role in both production and trade; and (iv) a separate banking sector. We then carefully calibrate this model to the UK’s withdrawal from the EU, guided by the terms specified in the Trade and Cooperation Agreement (TCA), signed in December 2020. We find that supply networks aggravate the losses from trade disintegration significantly, raising the cost of Brexit, even in the absence of tariffs. We also quantify the effects of trade liberalisation between the UK and the third countries, revealing gains, yet, only at a fraction of the losses from the new frictions to the UK-EU trade. Importantly, losses from the UK's exit from the EU are not shared equally and fall disproportionately on low-skilled households.

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 macro-finance 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.

This paper studies asymmetries in the global spillovers of US monetary policy across tightening and easing episodes. Local projections using identified US monetary policy shocks, separated into tightenings and easings, show that rate hikes depress output substantially more than equal-sized cuts stimulate it—both in the US and, more starkly, across twenty emerging market economies. To account for these findings, we develop a nonlinear three-country model comprising the US, an emerging-market bloc, and the rest of the world, in which occasionally binding bank balance-sheet constraints interact with trade in intermediate inputs and a cross-border credit network. We estimate four nested specifications using Bayesian methods. The estimated model reproduces both asymmetries: a US tightening lowers US output by about twice as much as an equal-sized easing raises it, and it is the credit network that transmits the contraction-but not the expansion-to emerging markets, a spillover that the fear of floating amplifies more than fourfold. This asymmetry also extends to balance-sheet policy: quantitative tightening contracts activity, whereas equal-sized easing has essentially no effect. Transmission is state-dependent as well: under a trade shock in the spirit of the February 2026 universal import tariffs, which pushes emerging-market banks against their constraint, US easing regains potency abroad. shocks.

This paper bridges the Synthetic Control Method (SCM) and Dynamic Stochastic General Equilibrium (DSGE) models. SCM effectively estimates causal treatment effects but lacks insights into underlying economic mechanisms, and it does not offer a framework for policy analysis: its estimated effect is a reduced-form object that shifts with the policy regime, leaving it exposed to the Lucas critique. By integrating SCM outcomes into a micro-founded DSGE framework, representing the treatment as an observable event that loads on the model's structural shocks, we identify the transmission channels underlying the SCM-estimated treatment effects and enhance structural interpretation. Our approach recovers policy-invariant structural primitives rather than the regime-dependent gap, enabling counterfactual policy analysis that is robust to the Lucas critique. It thereby unites the empirical transparency of synthetic controls with the structural discipline of DSGE models - two complementary literatures that have long developed in isolation.