RECENT PUBLICATIONS
Import Prices and Invoice Currency: Evidence from Chile (with E. Luttini), 2020, Journal of International Money and Finance, Elsevier, vol. 106(C).
Abstract: We use transaction-level customs data to document that a large majority of Chilean imports are invoiced in dollars regardless of country of origin and sector. We study the implications of this fact for the determination of exchange rate pass-through (ERPT) to border prices. We find that the special role of the dollar in international trade has real effects, but bilateral exchange rates with respect to exporter currencies also matter in the medium-term. In particular, exchange rate fluctuations against the dollar account for most of the ERPT in the short run and are still relevant after two years. However, the cumulative ERPT with respect to the exporter country's currency increases with time and after two years accounts for most of the ERPT to border prices.
Distributional effects of reducing energy subsidies: Evidence from recent policy reform in Argentina (with M.A. Lugo, A. Masut, and J. Puig), 2020, Energy Economics, Elsevier, vol. 92.
Abstract: We analyze the distributional effects of the reduction in energy subsidies in Argentina since 2016. As the policy reform also includes the introduction of a scheme to protect less well-off families (social tariff), we also review how well the targeting mechanism works. We apply traditional benefit-incidence analysis using household surveys and administrative data, focusing on residential subsidies to piped natural gas and electricity in the Buenos Aires Metropolitan Area. We find that the social tariff is relatively pro-poor, with significantly higher coverage among the poorest households. There are some exclusion errors in the low-income deciles and large inclusion errors in the medium- and high-income deciles. The distributive incidence of subsidies does not appear to have changed substantially. Energy subsidies in Argentina (albeit lower in aggregate terms) continue to be, although progressive, pro-rich. This is in large part due to the prevalence of the general flat subsidy rate mechanism over the social tariff mechanism. Regarding energy budget shares, monthly spending on electricity has increased from 1.1% of total household income to 3.4%. Monthly spending on piped natural gas rose from 1.3% to 3.3%. These shares are in line with many other countries in the region. Naturally, there has been a convergence of tariffs towards service provision costs, which becomes central in order to incentive sectoral investment and stimulate a good provision of services.
WORKING PAPERS
The Macroeconomic Impact of Climate Shocks in Uruguay (w/Daniel Navia and Heather Ruberl), 2024
Abstract: Uruguay is an economy that is vulnerable to precipitation patterns, as evidenced during the country’s historic 2022/23 drought. Yet, and despite its rich macroeconomic and climate data environment, the country does not have a consistent macroeconomic model to address the aggregate impact of climate shocks, let alone the expected additional impact from climate change. This paper intends to fill this gap by integrating climate shocks into the World Bank’s Macro-Fiscal Model, its workhorse structural macroeconomic projection model. Building on existing country studies on the sectoral effects of droughts and floods, the analysis finds that the volatility of a simulated Uruguayan economy only subject to historical climate shocks reaches 22 percent of the historical volatility of gross domestic product. Moreover, as climate shocks are only one of many shocks that can simultaneously affect an economy, incorporating exogenous macroeconomic shocks into historical climate shocks exacerbates volatility and increases potential losses. Gross domestic product can fall by 2.3 percent under a combined negative climate and macroeconomic shock of the type witnessed once every six years on average, and 4.1 percent under a once-in-40-years combined negative shock. Climate change compounds these effects going forward, worsening the magnitude of the downside risks from droughts by between 18 and 30 percent, although estimates incorporating climate change are subject to large uncertainty. The order of magnitude of these effects calls for a more systematic consideration of climate shocks in macroeconomic projections and fiscal risk assessments for Uruguay.
Market Power and Aggregate Efficiency in Financial Crises (w/G. Zaourak), 2017
Abstract: We document that during financial crises in emerging economies, large firms become relatively larger and small firms become relatively smaller. What are the aggregate consequences of the resulting increase in market concentration? We answer this question quantitatively with a model where firms can exploit their markup. Financial frictions take the form of a collateral constraint that gets tighter during a financial crisis. We discipline the model using detailed plant-level microdata for Colombia, and analyze the transition dynamics of an economy as it adjust to a credit crunch. We find that when firms are able to adjust their markups in response to a credit shock, the response of aggregate output and productivity is dampened. Variable markups act as a buffer that partially offsets the misallocation triggered by a financial crisis. This follows from output adjustments at the intensive and extensive margins.
Variable Markups and Misallocation in the Argentine Crisis, 2015
Abstract: I study the contribution of variable markups to the fall in TFP observed during crises. I adapt an imperfect competition model by Atkeson and Burstein (2008), where markups are a function of within-sector market shares. Using manufacturing microdata, I show that market shares become more disperse during the Argentine 2001/02 crisis, which results in increased variability of markups. I find that variable markups explain between 6.4% and 15.6% of the fall in TFP during the 2001/02 Argentine crisis.
Stock Market Prices, Unemployment, and Consumption in the United Kingdom, 2015
Abstract: I find a robust relationship between the unemployment rate and stock market prices in the UK, when prices are detrended by wages. Specifically, stock market prices Granger-cause the unemployment rate. This link, however, seems weaker than in the US. I conjecture that this could be due to the relative inflexibility of UK labor markets with respect to those in the US, and shift the focus to the relationship between stock market prices and consumption. I .find evidence of a strong link between them. Furthermore, stock market prices Granger- cause consumption in the UK, but not the opposite.This is consistent with a model where output is demand determined and self-fulfilling beliefs about asset prices in influence consumption.
Why do they lag? Rent-Seeking Activities, Misallocation, and innovation in Emerging Economies (in progress, w/G. Zaourak)
Abstract: We show that rent-seeking activities, in the form of bribes or lobbying, have aggregate effects through two channels. First, they generate misallocation of resources across firms, since they prevent resources to flow to the most productive firms, flowing instead to those who succeed in their rent-seeking efforts. Second, they affect the allocation of resources within firms, since they drive resources away from innovation activities. These two channels can help explain why developing economies have both more misallocation across firms and less investment in research and development than developed economies. Using a model with heterogeneous agents and endogenous innovatioin with rent-seeking effort, we quantify the contribution of these factos to the welfare and productivity differences across countries. We find that rent-seeking activities can help explain a sizable portion of the differences in GDP per capita between emerging and developing economies, mainly through their effect on innovation.
REPORTS
Uruguay: Systematic Country Diagnostic Update (w/M. Larizza and L. Rodriguez Chamussy), World Bank, 2022.
The end of the commodity price boom ushered in Uruguay period of lower growth rates and less poverty reduction, accompanied by rising debt and fiscal deficits. The reforms that generated strong and inclusive growth after the 2002 crisis were no longer sufficient to generate quality jobs and adequate incomes, notably, among the poor and vulnerable. This report highlights four development challenges: (i) creating the conditions for a more competitive and integrated economy, (ii) transforming the education system to promote better outcomes and more labor market–relevant learning, (iii) improving performance in the delivery of services, such as water, sanitation, and electricity, and (iv) promoting inclusive and climate resilient green growth. These challenges are assessed under an institutional lens that provides an integrated approach to strengthening institutional capital.
Argentina: Escaping Crises, Sustaining Growth, Sharing Prosperity (w/M.A. Lugo, G. Ruta and E. Sinnott), World Bank, 2018.
Argentina is rich in natural capital assets and has a historically strong middle class. Nonetheless, compared to that of its peers, Argentina’s long-run economic performance has been disappointing, affecting the country’s ability to reduce poverty and increase incomes of its citizens. This report is an analysis on the medium-term agenda to ensure growth and shared prosperity in Argentina and comes at a time when the country is embarking on deepening structural reforms while dealing with recent sudden financial market pressures that emerged in April 2018. The focus of the report is on medium- to longer-term development challenges in Argentina, rather than contemporaneous macroeconomic developments. The report looks at the policies needed to Argentina to end its vicious circle of fourteen economic crisis since 1950, that the country experienced. This includes a substantial focus on macroeconomic policies to set in place the foundations for medium-term growth and shared prosperity by boosting jobs and productivity.
PRE-DOCTORAL WORK
"Sovereign Debt in Latin America and the Caribbean: an Analysis of its Composition and Sustainability", with G. Sandleris, IADB, 2010.
"Agricultural Policies and Trade in the European Union and Selected Latin American Countries" with R. Colomé in Trade, Integration and Economic Development, ECSA Austria Publication Series (13), SpringerWien New York, 2008.
"El Banco Provincial de Cordoba en la Crisis de 1890/91", with M. Gómez, in Anales de la Asociación de Economía Política, 2006.
Balance de la Economía Argentina, ed. Eudecor, Córdoba. Chapters 7 and 14-16, 2006.