Research

• No Credit, No Gain: Trade Liberalization Dynamics, Production Inputs, and Financial Development [published, pdf, appendix, files for replication], joint with Fernando Leibovici and Michal Szkup, International Economic Review, v. 64, n. 2, pp. 809--836, 2023.

Premio Academia Nacional de Ciencias Economicas Dr. Julio H. G. Olivera, Argentina 2022  [pdf] 

We study the role of financial development on the aggregate implications of reducing import tariffs on capital and intermediate inputs. We document empirically that financially underdeveloped economies feature a slower aggregate response following trade liberalization. To quantify these effects, we set up a general equilibrium model with heterogeneous firms subject to collateral constraints and estimate it using Colombian plant-level data. We find that low financial development substantially limited the gains from trade liberalization in Colombia in the early 1990s. More broadly, we find that low financial development substantially limits both the aggregate and welfare gains from tariff reductions.

Financial Frictions and International Trade: A Review [published, pdf, slides], joint with Fernando Leibovici and Michal Szkup, Oxford Research Encyclopedia of Economics and Finance, May 2022.

This paper reviews recent studies on the impact of financial frictions on international trade. We first present evidence on the relation between measures of access to external finance and export decisions. We then present an analytical framework to analyze the impact of financial frictions on firms' export decisions. Finally, we review recent applications of this framework to investigate the impact of financial frictions on international trade dynamics across firms, industries, and in the aggregate. We discuss related empirical, theoretical, and quantitative studies throughout.

Trade in Commodities and Business Cycle Volatility [published, pdf, appendix, files for replication, article], joint with Fernando Leibovici and Håkon Tretvoll, American Economic Journal: Macroeconomics, v. 13, n. 3, July 2021.

This paper studies the role of differences in the patterns of production and international trade on the business cycle volatility of emerging and developed economies. We study a multi-sector small open economy in which firms produce and trade commodities and manufactures. We estimate the model to match key cross-sectional and time-series differences across countries. Emerging economies run trade surpluses in commodities and trade deficits in manufactures, while sectoral trade flows are balanced in developed economies. We find that these differences amplify the response of emerging economies to commodity price fluctuations. We show evidence consistent with this mechanism using cross-country data.

Financial Frictions and Export Dynamics in Large Devaluations [published, pdf, appendix, files for replication, webinar, article], joint with Fernando Leibovici and Michal Szkup, Journal of International Economics, v. 122, January 2020, 103257.

We study the role of financial frictions and balance-sheet effects in accounting for the dynamics of aggregate exports, output, and investment in large devaluations. We investigate a small open economy with heterogeneous firms and endogenous export decisions, in which firms face financing constraints and debt can be denominated in foreign units. We find that these channels can explain only a small fraction of the dynamics of exports observed in the data since financially-constrained exporters increase exports by reallocating sales across markets. We show analytically the role of this mechanism on exports adjustment and document its importance using plant-level data.

Financial Frictions and New Exporter Dynamics [published, pdf, appendix, files for replication, article],  joint with Fernando Leibovici and Michal Szkup, International Economic Review, v. 57, n. 2, pp. 453--486, 2016.

This paper studies the role of financial frictions as a barrier to international trade. We study new exporter dynamics to identify how these frictions affect export decisions. We introduce a borrowing constraint and working capital requirements into a standard model of international trade, with exports more working-capital-intensive than domestic sales. Our model can quantitatively account for new exporter dynamics, in contrast to a model with sunk export entry costs. We provide additional evidence in support of our mechanism. We find that financial frictions reduce the impact of trade liberalization, suggesting that they constitute an important trade barrier.

International Capital Flows and House Prices: Theory and Evidence [pdf, files for replication], joint with Jack Favilukis, Sydney Ludvigson, and Stijn Van Nieuwerburgh, Housing and the Financial Crisis, NBER Cambridge, MA. Chapter 8, 2013.

The last fifteen years have been marked by a dramatic boom-bust cycle in real estate prices, accompanied by economically large fluctuations in international capital flows. We argue that changes in international capital flows played, at most, a small role in driving house price movements in this episode and that, instead, the key causal factor was a financial market liberalization and its subsequent reversal. Using observations on credit standards, capital flows, and interest rates, we find that a bank survey measure of credit supply, by itself, explains 53 percent of the quarterly variation in house price growth in the U.S. over the period 1992-2010, while it explains 66 percent over the period since 2000. By contrast, once we control for credit supply, various measures of capital flows, real interest rates, and aggregate activity collectively add less than 5% to the fraction of variation explained for these same movements in home values. Credit supply retains its strong marginal explanatory power for house price movements over the period 2002-2010 in a panel of international data, while capital flows have no explanatory power. Keywords: housing boom and bust, global savings glut, foreign capital flows. 

In The Economist, Free Exchange, Jan 25th 2012, "weekly interesting economic research"

Fluctuations of the Current Account and the Causes of the Argentina Long-run Growth Slowdown, joint with Alberto M. Diaz Cafferata and Leonardo Berbotto, Trade, Integration and Institutional Reforms in Latin America and the European Union Eisen et al. Eds. Peter Lang, Frankfurt, 2007.

Filtered Argentine GDP 1875-2002 series displays a continuously declining trend growth along the XXth Century. Searching for permanent causes, short-run and long-run properties of models with international assets mobility are discussed and the behavior of national and foreign savings -the current account- in Argentina are examined: stylized facts are high correlation of investment and national savings, stationarity of the CA around zero for the period 1935-2002 without structural breaks, high frequency of cycles, substitution of national and external savings. The evidence shows little contribution of external savings to the financing of long-run growth and suggests elements for a growth strategy.

Addicted to Debt: Foreign Purchases of U.S. Treasuries and the Term Premium [pdf]

This paper investigates the effect of purchases of U.S. Treasury bonds by foreigners on long-term yields and the term-premium. I set up a consumption-based model with habit preferences, calibrate it to match data on U.S. Treasury yields, and find that each additional 100USD billions of foreign official purchases of U.S. Treasuries decreased long-term yields by 50 basis points prior to the financial crisis 2008-2009. Half of this change is explained by a drop in the term-premium: Foreign purchases increased domestic agents’ consumption above their past consumption, reducing their risk-aversion and decreasing the term-premium. Finally, I show that a reversal of foreign inflows results in a sharp increase in long-term yields.

Trade and Sovereign Default, joint with Eugenia Andreasen and Guido Sandleris.

International Trade Finance and Learning Dynamics, joint with Emiliano Luttini, Michal Szkup and Shengxing Zhang.

International Trade and Costly Adjustment to Sudden Stops, joint with Fernando Leibovici and Michal Szkup.

International Equilibrium Portfolios and Asset Prices, joint with Emilio Espino.

Liquidity Shocks and Transmission to Emerging Economies: Evidence from the International Debt Crisis of the 1980s, joint with Sebastian Alvarez.