My primary fields of research are Macroeconomics, International Macroeconomics, and International Finance.
Published Papers
Monetary Policy under Uncertain Expectations in an Emerging Economy, (with Yang Jiao and Seunghoon Na) (Paper). Forthcoming, IMF Economic Review.
Abstract:
Monetary policy reforms in emerging market economies are often shaped by histories of high inflation, which give rise to persistent concerns about the anchoring of private-sector expectations. Against this background, we embed near-rational expectations (NRE) into a small open economy New Keynesian model and characterize robustly optimal monetary policy when the central bank faces Knightian uncertainty about private-sector belief distortions. Applying the framework to Mexico’s post–Peso Crisis monetary policy reforms during 1998–2007, we estimate both NRE and rational-expectations (RE) versions of the model. The estimated NRE model implies a substantial concern for robustness and decisively outperforms RE alternatives in tracking the policy rate, which is not used in the estimation. The robust policy rule alone does not deliver this: with the same rule but rational private agents, the model fails on the policy rate. The identification is an open-economy phenomenon: re-estimated as a closed economy, the NRE model collapses to its RE counterpart. The concern for robustness leads the central bank to stabilize domestic inflation more aggressively while tolerating larger nominal exchange rate adjustments, and it generates endogenous history dependence, producing persistent inflation dynamics even in the absence of backward-looking price setting.
Financially Constrained Households and Consumption Volatility in Open Economies, (with Tiago Tavares) (Paper). IMF Economic Review (2026)
Abstract:
Emerging market economies often exhibit aggregate consumption that is more volatile than output, contrary to the consumption-smoothing prediction of standard macroeconomic models. This paper shows that heterogeneity in access to financial services can generate this excess volatility in a small open economy model driven by transitory productivity shocks alone. The mechanism is an unconstrained-amplification channel: as capital income is concentrated among fewer unconstrained households, their consumption unwinds more slowly after transitory shocks, raising its volatility relative to output. Procyclical firm entry provides a secondary amplification layer by strengthening the labor-income channel for hand-to-mouth households, but it is not the primary source of the result. Estimating the full model on macroeconomic data for 10 advanced, 17 emerging, and 11 low-income economies, we recover hand-to-mouth shares that rise with lower levels of development and align closely with independent microdata on financial access.
Clustered Sovereign Default (Paper)(Slides). Journal of International Economics (2024): 103999, Vol. 152.
Abstract:
Clustered sovereign defaults are a recurring phenomenon. In order to understand the nature of shocks and the mechanism through which these shocks lead countries to clustered defaults, the paper starts with a joint estimation of the structural parameters driving the output process of 24 defaulting countries and a process for the world interest rate. The postulated output process includes transitory and permanent global components as well as transitory and permanent country-specific components. The paper then builds a sovereign default model augmented with financial frictions at the firm level. In spite of the fact that the shocks are estimated independently of the model or of default data, once fed into the model, they reproduce the clustered default of 1982, providing a joint validation of the model and the estimated driving forces. The model predicts that it is the global shocks to the transitory component of output that are most important in leading countries to default in clusters. Contrary to what is commonly believed, the Volcker interest-rate hike was not a determinant factor of the 1982 developing country debt crisis.