Publications
"Sovereign Default: The Role of Expectations," with Gaston Navarro, Juan Pablo Nicolini, and Pedro Teles.
Journal of Economic Theory, vol. 175, pp. 803-812, 2018.
[published version] [working paper] [slides] [codes]
Abstract: We study a variation of the standard model of sovereign default, as in Aguiar and Gopinath (2006) or Arellano (2008), and show that this variation is consistent with multiple interest rate equilibria. Some of those equilibria correspond to the ones identified by Calvo (1988), where default is likely because rates are high, and rates are high because default is likely. The model is used to simulate equilibrium movements in sovereign bond spreads that resemble sovereign debt crises. It is also used to discuss lending policies similar to the ones announced by the European Central Bank in 2012.
Working Papers
"Real Exchange Rates and Primary Commodity Prices," with Constantino Hevia and Juan Pablo Nicolini.
revise and resubmit at Journal of International Economics.
[working paper] [slides]
Abstract: In this paper, we show that a substantial fraction of the volatility of real exchange rates between developed economies such as Germany, Japan, and the United Kingdom against the US dollar can be accounted for by shocks that affect the prices of primary commodities such as oil, aluminum, maize, or copper. Our analysis implies that existing models used to analyze real exchange rates between large economies that mostly focus on trade between differentiated final goods could benefit, in terms of matching the behavior of real exchange rates, by also considering trade in primary commodities.
"Knowledge Flows and Dark Matter," (job market paper)
new version coming soon
Abstract: I quantify the flow of knowledge within U.S. multinational corporations in the United States and European Union. I use a general equilibrium model of knowledge flows within multinationals and compute the parameter values related to knowledge production such that, in steady state, the model matches the observed factor share differentials between the operations of U.S. multinationals in the United States and European Union. The main assumptions are: i) U.S. multinationals produce knowledge in the United States; ii) this knowledge is used by its subsidiaries in the European Union; and iii) investment in knowledge is either unobserved or expensed in corporate accounts. Under these assumptions, the model predicts that the observed labor share of U.S. multinational operations in the United States must be higher than the labor share of their subsidiaries in the European Union, whereas the ratio of capital expenditures to compensation of employees must be the same, both patterns found in the data. The results show that (a) the calibrated model matches the observed differentials in the rates of return of U.S. multinational investments in the U.S. and in the European Union, (b) investment in knowledge is 1.4 times larger than investment in physical capital. Furthermore, I show that the model calibrated with these parameter values has quantitative implications for international real business cycles. Accounting for the corporate sector GDP correlation, the model with knowledge flows reduces the distance between the standard international real business cycle model and data by 48%.
Work in Progress
"Self-Fulfilling Debt Crises with Long Stagnations," with Gaston Navarro, Juan Pablo Nicolini, and Pedro Teles.
"The Monetary and Fiscal History of Latin America: Brazil," with Marcio Garcia and Diogo Guillén.
"Lack of Firm Entry and the Slow Recovery of the U.S. Economy After the Great Recession," with Gajendran Raveendranathan.
[paper]
Abstract: We show that lack of firm entry has been an important factor causing the slow recovery of employment in the United States after the Great Recession. Our counterfactual exercise shows that lack of firm entry accounts for 22 percent of the difference between the actual level of employment per labor force participant in March 2012 and its pre-recession level, in March 2007. In a standard model of firm dynamics featuring aggregate uncertainty and firm heterogeneity, we show that a negative aggregate productivity shock does not generate a drop in firm entry, while a negative demand shock does. The latter causes a significant drop in firm entry that is similar to the one observed during the Great Recession. However, the demand shock alone does not generate a slow recovery. Finally, we provide empirical evidence that contradicts common explanations for the slow recovery, such as financial constraints, offshoring, increased uncertainty at the firm level, and increased self-employment.
"Price Setting in a Variable Macroeconomic Environment: Evidence from Brazilian CPI," with Rebecca Barros, Marco Bonomo, Carlos Carvalho, and Silvia Matos.
"Sales and the Macroeconomy," with Rebecca Barros, Marco Bonomo, and Carlos Carvalho.
"Yet More Heterogeneity in Price Stickiness, Yet Larger Monetary Non-Neutralities," with Carlos Carvalho.
"Sovereign Default: The Role of Expectations," with Gaston Navarro, Juan Pablo Nicolini, and Pedro Teles.
Journal of Economic Theory, vol. 175, pp. 803-812, 2018.
[published version] [working paper] [slides] [codes]
Abstract: We study a variation of the standard model of sovereign default, as in Aguiar and Gopinath (2006) or Arellano (2008), and show that this variation is consistent with multiple interest rate equilibria. Some of those equilibria correspond to the ones identified by Calvo (1988), where default is likely because rates are high, and rates are high because default is likely. The model is used to simulate equilibrium movements in sovereign bond spreads that resemble sovereign debt crises. It is also used to discuss lending policies similar to the ones announced by the European Central Bank in 2012.
Working Papers
"Real Exchange Rates and Primary Commodity Prices," with Constantino Hevia and Juan Pablo Nicolini.
revise and resubmit at Journal of International Economics.
[working paper] [slides]
Abstract: In this paper, we show that a substantial fraction of the volatility of real exchange rates between developed economies such as Germany, Japan, and the United Kingdom against the US dollar can be accounted for by shocks that affect the prices of primary commodities such as oil, aluminum, maize, or copper. Our analysis implies that existing models used to analyze real exchange rates between large economies that mostly focus on trade between differentiated final goods could benefit, in terms of matching the behavior of real exchange rates, by also considering trade in primary commodities.
"Knowledge Flows and Dark Matter," (job market paper)
new version coming soon
Abstract: I quantify the flow of knowledge within U.S. multinational corporations in the United States and European Union. I use a general equilibrium model of knowledge flows within multinationals and compute the parameter values related to knowledge production such that, in steady state, the model matches the observed factor share differentials between the operations of U.S. multinationals in the United States and European Union. The main assumptions are: i) U.S. multinationals produce knowledge in the United States; ii) this knowledge is used by its subsidiaries in the European Union; and iii) investment in knowledge is either unobserved or expensed in corporate accounts. Under these assumptions, the model predicts that the observed labor share of U.S. multinational operations in the United States must be higher than the labor share of their subsidiaries in the European Union, whereas the ratio of capital expenditures to compensation of employees must be the same, both patterns found in the data. The results show that (a) the calibrated model matches the observed differentials in the rates of return of U.S. multinational investments in the U.S. and in the European Union, (b) investment in knowledge is 1.4 times larger than investment in physical capital. Furthermore, I show that the model calibrated with these parameter values has quantitative implications for international real business cycles. Accounting for the corporate sector GDP correlation, the model with knowledge flows reduces the distance between the standard international real business cycle model and data by 48%.
Work in Progress
"Self-Fulfilling Debt Crises with Long Stagnations," with Gaston Navarro, Juan Pablo Nicolini, and Pedro Teles.
"The Monetary and Fiscal History of Latin America: Brazil," with Marcio Garcia and Diogo Guillén.
"Lack of Firm Entry and the Slow Recovery of the U.S. Economy After the Great Recession," with Gajendran Raveendranathan.
[paper]
Abstract: We show that lack of firm entry has been an important factor causing the slow recovery of employment in the United States after the Great Recession. Our counterfactual exercise shows that lack of firm entry accounts for 22 percent of the difference between the actual level of employment per labor force participant in March 2012 and its pre-recession level, in March 2007. In a standard model of firm dynamics featuring aggregate uncertainty and firm heterogeneity, we show that a negative aggregate productivity shock does not generate a drop in firm entry, while a negative demand shock does. The latter causes a significant drop in firm entry that is similar to the one observed during the Great Recession. However, the demand shock alone does not generate a slow recovery. Finally, we provide empirical evidence that contradicts common explanations for the slow recovery, such as financial constraints, offshoring, increased uncertainty at the firm level, and increased self-employment.
"Price Setting in a Variable Macroeconomic Environment: Evidence from Brazilian CPI," with Rebecca Barros, Marco Bonomo, Carlos Carvalho, and Silvia Matos.
"Sales and the Macroeconomy," with Rebecca Barros, Marco Bonomo, and Carlos Carvalho.
"Yet More Heterogeneity in Price Stickiness, Yet Larger Monetary Non-Neutralities," with Carlos Carvalho.