Publications
Firm Dynamics, Informality, and Monetary Policy. The B.E. Journal of Macroeconomics, 2025 (forthcoming).
The Evolving Landscape of Tourism, Travel, and Global Trade since the Covid-19 Pandemic. Research in Globalization, 2024 (joint with W. Leimgruber). (link.)
Accounting for Real Exchange Rates in Emerging Economies: The Role of Commodity Prices. International Review of Economics and Finance, 2022 (joint with F. Dzikpe) (link).
International Risk Sharing in Emerging Economies. International Finance, 2020 (link). online appendix (pdf).
Informality and International Business Cycles. Journal of International Financial Markets, Institutions & Money, 2019 (link)
Financial Intermediation and Real Estate Prices Impact on Business Cycles: A Bayesian Analysis. North American Journal of Economics and Finance, 2018 (link)
Cyclical wage movements in emerging markets compared to developed economies: A general equilibrium comment. The Journal of International Trade & Economic Development, 2018 (link). (Highlights link)
The Impact of Credit and Fiscal Policy under a Liquidity Trap. North American Journal of Economics and Finance, 2017 (link).
Financial Conditions and Labor Productivity over the Business Cycle. Economics Letters, 2017 (link). online appendix (pdf).
Financial Intermediation, Consumption Dynamics, and Business Cycles. Economic Modelling, 2017 (link).
Working Papers
Determinants of Sovereign Risk Redux: The Sovereign Debt Cost of the Informal Economy.
Sovereign defaults have adverse and long-lasting economic costs on the defaulting countries. One factor that has received limited attention in the literature is the impact of untaxed and unregulated economic activities, often referred to as the "informal economy." The tax evasion problem associated with the informal economy limits the government's ability to generate revenue, which is essential for repaying public debt obligations. This, in turn, increases the risk of sovereign default.
Emerging and developing market economies (EMDEs) typically face a higher risk of sovereign default and have a larger share of informal economic activity. This study examines a sample of 32 EMDEs from 1997 to 2019 to empirically assess the extent to which informal economic activity contributes to sovereign default risk in these countries while also controlling for well-documented macroeconomic fundamentals and global factors. Our findings indicate that the informal economy is a significant and economically important determinant of sovereign default risk in EMDEs.
The Sovereign Debt Cost of Eurozone Shadow Economies (with F. Guzman).
Sovereign debt defaults have constantly been a concern for both defaulting countries and international creditors. Much of the literature that explores the determinants of sovereign default has documented key macroeconomic fundamentals and global factors. However, this literature has largely overlooked an essential structural feature prevalent in many economies, namely a large shadow or informal economy, and the role it may play in determining sovereign default.
We examine the effect of informality on sovereign default on two fronts. Empirically, we estimate the effect of informality using Pappada and Rogoff (2025)’s novel metric of informality (EVADE) based on tax compliance for the European Union. Theoretically, we build a model of sovereign default with indivisible labor to examine the mechanism through which informality affects sovereign default. Our findings indicate that the size of a country's informal economy, through its implicit role in tax evasion, is a crucial determinant of sovereign debt default.
Commodity prices, Market distortions, and informality in small open economies.
This paper studies the transmission of commodity price shocks in economies with a large informal sector. First, I provide novel empirical evidence that the informality rate increases in response to higher commodity prices. This new fact qualifies the commonly-held view that informal employment generally works as an insurance mechanism against shocks. Second, I develop a model of a small open commodity exporting economy with endogenous firm entry to analyze the transmission of commodity price shocks on sectoral (formal and informal) labor market and aggregate dynamics, as well as movements of the real exchange rate and capital flows. I find that the income effect resulting from commodity prices can be reconciled with the empirical facts when there is high substitutability across goods.