Publications
Publications
"Arbitraging Covered Interest Rate Parity Deviations and Bank Lending" [paper] [Online Appendix], American Economic Review, 2024, 114(9): 2633-67 (Lead Article)
I propose and test a new channel through which bank lending is affected in an emerging markets setting. This channel is that when banks arbitrage covered interest rate parity (CIP) deviations, they need to borrow in a particular currency. In the presence of borrowing frictions, banks shift part of the resources used to lend to households and firms to fund their arbitrage activities. I show this channel exists and affects bank lending.
"The Role of Family Networks in First-Credit Access", with Miguel Angel Carpio and Alessandro Tomarchio [paper]
Using a dataset of more than 38 million consumer-bank relationships in 518 districts of Southern Peru, we find that first-time borrowers receive credit and better loan terms from the bank where their families are more central. Our results are explained by informal-oriented banks using family ties as a strategy toward the unbanked. They give first credits to retain the relatives of the recipients as clients, and they also screen first-time borrowers using the credit behavior of their relatives.
"Trade Liberalization and Long-Run Local Economic Development: Evidence from the Savoy Great Free Zone" [paper], with Ricardo Piqué
We explore the effect of trade liberalization and long-run local economic development using the case of the Savoy Great Free Zone (GFZ).
"Speculation, Forward Exchange Demand, and CIP Deviations in Emerging Economies" [paper], with Pierre De Leo and Dongchen Zou
We argue that speculative forces drive the currency forward demand and shape the covered interest parity (CIP) deviations in emerging economies. We propose a model in which global investors demand forward exchange to profit from predictable currency returns, while local intermediaries, constrained by position limits, arbitrage between segmented spot and forward markets. We test the model in the data.
"Global Investors in Local-Curency Bond Markets: Implications for Bond Yields and Exchange Rates"[paper], with Pierre De Leo and Giuliano Simoncelli, Mauricio Villamizar-Villegas and Tomas Williams
The comovement between long-term bond yields and exchange rates differs between advanced and emerging economies. In emerging economies, lower bond term premia are accompanied by lower currency premia. Using transaction-level data from Colombia and a portfolio-balance model that includes these correlated inflows, we explain the comovement in bond yields and exchange rates, the patterns of positions and returns in bond and foreign exchange markets, the effects of quantitative easing, and their differences between advanced and emerging economies.
"Capital Controls and Risk Misallocation : Evidence From a Natural Experiment" [paper]
I exploit heterogeneity in the strictness of capital controls across Peruvian banks to provide novel evidence of the effect of capital controls on firms' dollar borrowing from banks.