Publications and forthcoming papers
Imperfect Competition in the Banking Sector and Macroeconomic Instability (with Leonor Modesto and Teresa Loyd-Braga) Journal of Mathematical Economics 112 (2024),102968.
Sovereign default, fiscal policy, and macroeconomic instability (with Leonor Modesto), Journal of Public Economic Theory, 24 (2022), 1386-1412.
Transparency and Collateral: Central versus bilateral clearing (with Gaetano Antinolfi and Francesca Carapella), Theoretical Economics, 17 (2022), 185-217.
Real consequences of open market operations: The role of limited commitment (with Pedro Gomis-Porqueras), European Economic Review, Volume 132 (2021).
Endogenous Credit and Investment Cycles with Asset Price Volatility (with Leonor Modesto), Macroeconomic Dynamics, 22.7 (2018): 1859-1874.
Joint Liability with Endogenously Asymmetric Group Loan Contracts (with Burak Uras), Journal of Development Economics, Volume 127 (2017), pp.72-90
Costly Monitoring, Dynamic Incentives, and Default (with Gaetano Antinolfi), Journal of Economic Theory, Volume 159, Part A (2015), pp. 105-119
Working Papers
E-Money, Risk Sharing, and Welfare (with Burak Uras). R&R at European Economic Review
We develop a micro-founded monetary model to inquire the role of a privately provided e-money instrument for household consumption smoothing and welfare. Different from fiat money, e-money users pay electronic transaction fees, but in turn e-money reduces their spatial separation frictions and enables risk-sharing through remittance transfers. We characterize the profit maximizing e-money transaction fees charged by a monopolist technology provider and the optimality of price regulation. Calibrating the model for the context of Kenya's e-money product M-Pesa shows that the introduction of M-Pesa through a monopolist increases aggregate welfare by 1.6%, while regulating e-money prices and fully eliminating the monopoly power of the technology provider raises the aggregate welfare only by 0.4% beyond what is achieved through the monopolist.
Asymmetric Group Loan Contracts: Experimental Evidence (with Burak Uras, Sigrid Suetens, and Philine Visser). R&R at the Journal of the Economic Science Association
We design an experiment to study the role of (a)symmetry in the context of group lending with joint liability. The performance of joint-liability contracts crucially hinges on borrowers engaging in peer monitoring. We find that asymmetric contracts, in which monitoring is a dominant strategy for one borrower, increase the monitoring rate, and thus the repayment rate and performance. Moreover, asymmetric contracting also increases expected profits of the lending institution. Overall, our results suggest that asymmetric joint-liability contracts are worth considering as part of a policy to maintain financial stability.
We study the delegation of monitoring activity to financial intermediaries that are not subject to regulation. Intermediaries cannot observe the returns of the borrowers' project directly, and must conduct costly monitoring. Moreover, they face limited liability and have limited commitment when monitoring their loans. We demonstrate that, when intermediaries cannot commit to monitor loans, allowing financial intermediaries to issue risky debt and hold safe assets in their portfolio can mitigate the delegation problem. Moreover, we find that equity, rather than access to safe assets, does not resolve the intermediary's commitment problem. Finally, we quantify the discipline value of safe assets, finding it to be equivalent to a 2.6% increase in consumption.
Selected Work in Progress
Excess of Transfer Progressivity in the Village (with Albert Rodriguez Sala and Raul Santaeulalia-Llopis)
Optimal Monetary Policy Under Incomplete Financial Markets when Money is Essential, (with Gaetano Antinolfi and Enrique Kawamura)