Publications
"Capital controls and firm performance" (with S. Bauducco and E. Dardati). Journal of International Economics, 2024, vol.150.
This paper examines how capital controls (CCs) impact firms differently depending on their production technology and export status. Using evidence from Chile’s encaje (1991–1998), we show that exporting firms in capital-intensive sectors are more negatively affected than those in less capital-intensive sectors. A general equilibrium model with heterogeneous firms, financial constraints, and international trade confirms these effects, driven by higher financing costs, real exchange rate depreciation, and shifts in the composition of exporters and non-exporters.
"Exploring the Effects of FTAs on Chilean Exports: Heterogeneous responses and Financial Constraints" (with R. Alvarez). Estudios de Economía, 2024, vol. 51(2)..
This paper examines the impact of Free Trade Agreements (FTAs) on Chilean exports over the past 30 years. Despite Chile signing 31 FTAs with 65 countries—covering nearly 90% of global GDP—empirical evidence on their effects remains scarce. Using a difference-in-differences approach and detailed trade data, we find that FTAs significantly increase export levels and product diversification. The effects vary by industry and trading partners’ income levels, and we show that FTAs also help mitigate financial constraints on trade by interacting with financial development and capital control policies.
"The political economy of sovereign defaults" (with G. Sandleris and A. Van der Ghote). Journal of Monetary Economics, 2019, vol. 104.
This paper examines how income distribution and the tax system influence sovereign borrowing and default decisions, considering the political constraints governments face when raising revenue. Incorporating agent heterogeneity and a political support constraint into a DSGE model of sovereign default, we find that higher income inequality and regressive taxes increase the likelihood of default and reduce equilibrium sovereign borrowing. Tighter political support requirements further amplify these effects.
"Capital controls and the cost of debt" (with M. Schindler and P. Valenzuela). IMF Economic Review, 2019, vol. 67 (2).
This paper examines how capital inflow restrictions impact corporate bond spreads using a panel dataset of international corporate bonds and capital account restrictions in advanced and emerging economies. We find that stricter capital controls significantly increase corporate bond spreads—by up to 35 basis points for a one-standard-deviation increase in capital controls. The effect varies across firms and countries, with stronger impacts on firms with limited access to alternative external financing, revealing a novel channel through which capital controls influence economic outcomes.
"Financial openness, domestic financial development and credit ratings" (with P. Valenzuela). Finance Research Letters, 2016, vol. 16.
This paper examines how financial openness influences corporate and sovereign credit ratings, showing that its impact depends on the development of the domestic financial market. Firms and governments in less financially developed economies benefit the most from opening their capital accounts, while the effect diminishes as domestic capital markets become more developed.
"Sovereign default, enforcement and the private cost of capital". International Review of Economics and Finance, 2015, vol. 39.
This paper develops a signaling model in which a government's sovereign debt repayment decision informs lenders about its ability to enforce contracts. If a sovereign default signals weak contract enforcement, lenders tighten financial conditions for local firms, leading to a sharp decline in credit and investment. The paper highlights the informational channel as a key mechanism explaining the deterioration of private-sector financial conditions following default episodes.
Work in progress
"Beware the side effects: Capital controls, trade, misallocation and welfare" (with S. Bauducco, E. Dardati and E. Mendoza). NBER Working Paper 30963. R&R, Journal of Political Economy: Macroeconomics.
This paper examines how capital controls distort capital allocation across firms. Using a dynamic general equilibrium model with heterogeneous firms, monopolistic competition, and borrowing constraints, we show that capital controls increase misallocation through static, dynamic, and general equilibrium effects. A quantitative analysis calibrated to Chile’s 1990s encaje predicts stronger distortions for exporters and high-productivity firms, leading to a decline in exports and exporter share. Empirical evidence from Chilean firm-level data supports these predictions, highlighting the policy trade-offs of capital controls.
"Capital Flow Management Measures and Dollarization" (with V. Nuguer). Paper. R&R, Journal of International Money and Finance.
This paper examines the aggregate and bank-level effects of increasing foreign currency reserve requirements (RRFC) in a partially dollarized economy. Using data from Peru (2008–2017), we show that RRFCs effectively reduced overall credit, with heterogeneous bank responses depending on foreign currency exposure. A DSGE model incorporating financial frictions, bank heterogeneity, and financial dollarization replicates these empirical findings and highlights the mechanisms driving the economy’s response.
"Climate shocks, debt dynamics and fiscal vulnerabilities" (with P. Margaretic).
This paper examines how climate shocks affect debt dynamics and fiscal vulnerabilities in low- and middle-income countries. We focus on hurricanes, linking events from the International Disaster Database to daily five-year sovereign CDS spreads for 28 countries between 2010 and 2022. Using Refinitiv Eikon Datastream data, we estimate the direct and indirect effects of hurricanes—accounting for spillovers via a spatial weight matrix of neighboring countries—on sovereign borrowing costs. Results highlight how disasters raise risk premia, with implications for debt sustainability, financing needs, and fiscal space. The analysis underscores climate change as a critical driver of sovereign vulnerability in emerging economies.
"Sovereign risk, firm financing and international trade" (with D. Kohn and G. Sandleris). Paper.
This paper combines empirical and quantitative analysis to examine how higher sovereign risk affects international trade. Using industry-level trade data, we show that rising sovereign spreads reduce imports—especially in import-intensive and finance-dependent sectors—while exports are affected more selectively. A calibrated model highlights the mechanisms behind these effects, showing how sovereign risk increases firms' borrowing costs, depreciates the real exchange rate, and reshapes trade dynamics through general equilibrium channels.
"The Impact of Capital Controls and Macroprudential Policies on Firm Financial Constraints: Substitution Effects in EMEs" (with J. De Gregorio, M. Jara and A. Undurraga). New Version.
This paper examines how capital controls (CCs) and macroprudential policies (MPs) affect firm-level financial constraints using a broad panel of public firms from emerging economies. While CCs tend to tighten financial constraints by restricting capital flows and credit supply, MPs alleviate them through a 'substitution channel' that reallocates funds from households to corporations. This effect is strongest when MPs target borrowers, with a greater impact on smaller firms and in bank-dominated financial systems.
"Investment opportunities and corporate credit risk" (with P. Valenzuela). CEA-University of Chile Working Paper 335