Journal Articles
Sovereign Risk, Public Investment and the Fiscal Policy Stance, with Antonio Cusato, Journal of Macroeconomics, Volume 67, March 2021, 103263
Working Papers
Sovereign Spread Volatility and Financial Risk
Data show that in emerging market economies (EMEs), sovereign spread volatilities are highly correlated across countries—far more so than domestic economic conditions are—and display strong comovement with global financial risk. Yet the sovereign default literature has largely attributed the time-varying behavior of spread volatility to local fundamentals. This paper documents that the main factor behind variation in spread volatility is shocks to the global risk premium. To do so, it develops a quantitative sovereign default model in which foreign investors feature a time-varying stochastic discount factor, calibrated to a group of emerging economies. Quantitative simulations of the model reveal that shocks to the global risk premium fully account for the observed cross-country comovement in sovereign spread volatility over the 2001–2021 period.
The Currency Composition of Corporate Balance Sheets, with Galina Hale, and Luciana Juvenal
This paper explores the forces that enabled emerging-market firms to strengthen their external liability structures over the past decades by increasing their reliance on equity and debt denominated in local currency. It develops a quantitative framework to identify the key factors driving the long-term shift in the currency composition of emerging-market corporates’ external liabilities. The model is calibrated to the Mexican economy over 1994–2018 and incorporates the adoption of the inflation-targeting regime, labor-productivity dynamics, global risk aversion, currency risk premia, and other structural features relevant for firms’ financing choices.
U.S. Monetary Policy and Firm-Financial Heterogeneity in Emerging Markets, with Robert Urbina
We study how firm-level financial heterogeneity shapes the investment response to U.S. monetary policy in emerging markets. Using firm-level data, we show that contractionary U.S. monetary shocks are followed by larger investment declines among firms with low default risk. This pattern contrasts with the response to global risk premium shocks, where firms facing stronger financial frictions exhibit the largest contractions. We develop a quantitative heterogeneous-firm small open economy model and demonstrate that these cross-sectional empirical patterns are informative about the relative strength of the commodity channel versus the financial channel in the global transmission of U.S. monetary policy.
Investing in Resilience under Fiscal Stress: Adaptation Policy and Sovereign Risk
This paper studies how climate adaptation investment interacts with sovereign risk in fiscally constrained emerging economies. I develop a dynamic sovereign default model in which the government chooses external borrowing and adaptation investment that mitigates future disaster losses but requires upfront fiscal resources. When fiscal space is tight, the government under-invests in resilience because additional borrowing raises default risk and financing costs, creating a climate–sovereign risk feedback loop. Calibrated to Mexico, the model shows that optimal adaptation reduces expected disaster losses and sovereign spreads, but that fiscal stress and high spreads sharply weaken investment incentives. The analysis highlights how concessional finance and climate-contingent instruments can crowd in adaptation and improve debt sustainability.
Policy-Oriented Research
Integrating the Economic Value of Coastal Ecosystems into the IMF's Debt Sustainability Framework (DSF), a joint project by The Nature Conservancy (TNC) and the University of California, Santa Cruz Center for Coastal Climate Resilience (CCCR)