20. Are Projects Boosted to Get Approved? Evidence From Ex-ante Investment Appraisal [PDF of draft]. Joint work with Cesar Ferreiro

In theory, resources should be allocated to the best projects. But empirical challenges have forced researchers to focus their flashlights on measuring cost-of-capital, hurdle rates, or implications of projects. Thus, they usually leave the ex-ante process of project preparation and appraisal as a black box. This paper explores a unique database of more than 28,000 investment projects between 1997 and 2021, which were prepared and evaluated in multiple rounds, also quantifying their Internal Rate of Return (IRR). First, we find that the project's IRR distribution tends to have bunching just above the cutoff rate for investment. This excess mass of projects of barely positive Net Present Value was not an inherent property of the projects, because this bunching moves as the pre-announced hurdle rate changes. Second, these projects closer to the hurdle rate tend to have longer iteration processes before receiving a passing IRR. Under some circumstances, they also exhibit higher overrun costs and lower completion delays on the execution. Third, project preparation units that have more technical capacity tend to need fewer iterations to reach a passing IRR. Overall, our evidence is coherent strategic models of project preparation, either through "IRR management" (akin to earnings management), or to models of dynamic "revise and resubmit" until getting a passing IRR. We discuss implications for the design of project preparation processes.

19. Who Votes for Draining Retirement Accounts? Political Economy Behind Financial Disruptions. [PDF of draft version April 12, 2023]. Joint work with Lucas Rosso (under review)

 A  fundamental tension exists between mandatory pension savings and democratic politics, since citizens may vote for politicians that allow early access to these savings. This unraveling may damage both pension and financial systems. This paper explores the political economy behind large withdrawals from pension funds in Chile, totaling 17% of GDP (2020-2021).  We document that the Congressional vote for dis-saving is affected by reelection expectations. Although these expectations may not always be rewarded by citizens.  Representatives running again for Congress in 2021 were 15 percentage points more likely to support the withdrawal bills. The closer the bill to the general election, the stronger the effect. Findings were robust when using Representatives that could not stand for re-election due to new electoral norms. Importantly though, we find an electoral premium for Representatives supporting the draft bills only under specific circumstances. Supporters of initial bills allowing dis-saving during lockdowns, negative output gaps or low inflation, had a higher probability of re-election as Deputy or in the Senate. By contrast, Representatives supporting a bill during a period of inflation or economic boom did not display electoral benefits, despite its proximity to the election. The exception were the few "pioneer politicians" that drafted this last bill, which were more likely re-elected despite the proposed bill did not pass into law. Our estimations are consistent with a simplified framework of electoral motives that interact with the socio-economic context. 

18. Causal effect of public holidays on economic growth. [submitted] version Nov 30 2022 Working paper SSRN] [slides Royal Economic Society 2021] [Data: global panel dataset on effective workweek days 2000-2019]. joint work with Lucas Rosso (under review)

Public holidays are regulations that directly reduce workers’ labor supply. These popular policies can have valuable benefits, but also have opportunity costs from foregone economic activity. A pervasive challenge to measuring these costs is that a country’s holidays are endogenous to income and preferences. Public holidays may even increase demand for subcategories of GDP, with an ambiguous magnitude on the whole economy. This paper presents a global panel of national holidays (2000-2019) for over 200 countries. Beyond long-run trends, it introduces a novel ``high frequency'' identification from public holidays falling on a weekend in a given year. For many countries that do not replace these ``lost holidays'', this mechanism transitorily increases working days for a year, in a way that is arguably orthogonal to other growth determinants. We find a statistically significant working-day elasticity of GDP around 0.2. This means that an extra holiday would forego around 20% of the proportional GDP. This is around half of the effect predicted by the aggregate labor share. As expected, the effect is stronger in activities more likely to be interrupted by these holidays, like manufacturing; without a distinguishable effect on activities likely to continue (e.g. mining, agriculture). It is also reassuring these transitory holidays relate to fewer work-related accidents and to more short-run happiness during the year. 

17. Trade Invoicing Currencies and Exchange Rate Pass-through: The Introduction of the Euro as a Natural Experiment [SSRN Working paper]., with Felipe Benguria. conditionally accepted at Journal of International Economics.

A recent literature emphasizes the prominence of dominant currencies in international trade invoicing, and the role of invoice currencies in the transmission of exchange rate shocks. In this paper, we examine the introduction of the euro as a once-in-a-century natural experiment which induced a substantial shifting in invoice currencies, allowing us to test existing theories. We use unique data on the invoice currencies of the universe of export and import transactions of a small open economy trading with the Eurozone over the period 1997-2010. Before the euro, exports to the Eurozone were dominated by the US dollar, and euro legacy currencies were rarely used. The introduction of the euro led a substantial number of firms to swiftly switch their invoice currencies to euros, which eventually accounted for 40\% of all transactions. We first study the determinants of the adoption of the euro in exports to the Eurozone, finding a key role for strategic complementarities and for the invoice currency of imported inputs. In the core of our analysis, we show how firms switching from dollars to euros faced a radical transformation of their exchange rate pass-through, in line with recent theories. While the literature has studied trade invoice currencies in settings in which these are very persistent firm-level choices, our findings validate the conjecture that large--scale policy changes can lead to changes in these choices, and simultaneous changes in exchange rate pass-through.

Keywords: Invoicing Currencies, Exchange Rates, Pass-through, Euro, Dominant Currency

JEL Classification: F1, F3, F4


16. How much does Mobility Matter for Value-Added Tax Revenue? Cross-Country Evidence International Tax and Public Finance  (forthcoming 2024) [SSRN Working paper Feb, 2023]. with Lucas Rosso

15. Commodity prices, currencies, and the threat of operational disruptions: Labor strikes at copper mines  Journal of Commodity Markets 2023 (link) [SSRN Working paper June 29, 2022]  

14.  Do Firms that State They are Financially Constrained Tend to Reinvest More of Their Profits?  International Review of Financial Analysis. (link to paper and working paper). Previous versions circulated as " Is Finance the Most Binding Constraint or Complaint? " [SSRN Working paper 2022]

13. Leviathan as a Financial Godfather: Debt Advantages of Wholly State-Owned Enterprises  2022. Global Strategy Journal. [link to paper]

12.  The Reinvestment by Multinationals as a Capital Flow: Crises, Imbalances and the Cash-Based Current Account.  Journal of International Money & Finance. 124 (June 2022). [Last Working paper SSRN] [Published]  (with E. Hansen) 

11.  Benchmarking the Covid-19 pandemic across countries and states in the USA under heterogeneous testing. Scientific Reports  11, 15199 (2021).  (with Asahi, K., Undurraga, E.A.)

10. Are there pricing spillovers within ETFs? Evidence from Emerging Market Corporate Bonds (2021).  Applied Economics.  2021  [last working paper] [published version]

9.  The effect of COVID-19 on the economy: evidence from an early adopter of localized lockdowns , with Kenzo Asahi, Eduardo Undurraga and Rodrigo  Valdes.  Journal of Global Health (2021) - 11.  [Open Access Published Version PDF] [Supplementary Material - PDF] [Published HTML]    [MedRxiv Working Paper].

8.  The development of Venture Capital in Latin America: A Comparative Perspective. CEPAL Review  128. June 2019 [Published]  (with Ernesto Stein) 

7.  Export take-offs and acceleration: unpacking cross-sector linkages in the evolution of comparative advantage (2019).  World Development. 117. 48-60. [Published version] [last working paper]

6.  Can the market value state-owned enterprises without privatizing them? An application to natural resources companies (2018) Resources Policy. 59. 282-290. [published version] [last working paper]

5.   How sensitive is corporate debt to swings in commodity prices?  (2017) Pablo Donders, M Jara, R Wagner. Journal of Financial Stability. 39. 237-258 [Published version] [last working paper]

4.   Stockpiling cash when it takes time to build: Exploring price differentials in a commodity boom  (2017) E Hansen, R Wagner. Journal of Banking & Finance 77, 197-212. [Published version] [Media: Diario Financiero]

3.   New exports from emerging markets: Do followers benefit from pioneers? (2015) R Wagner, A Zahler Journal of Development Economics 114, 203-223. [Published version] [correspondence across HS vintages]

 2.   Destroying collateral: asset security and the financing of firms (2015). Applied Economics Letters 22 (9), 704-709 (with Janet Rubin) [Published version]

Other papers under review

Other Working papers