Geoeconomic Fragmentation and Commodity Markets Accepted for publication at the Journal of International Money and Finance
with Jorge Alvarez, Mehdi Benatiya Andaloussi, Alexandre Sollaci, Martin Stuermer and Petia Topalova (all IMF)
We examine how trade fragmentation–defined as policy-driven reversal of integration into rival blocs–affects granular commodity prices, as well as country-specific and global welfare. Using a novel dataset of production and trade of 48 key commodities, we calibrate a partial equilibrium model for each commodity market to compare outcomes in an integrated world with those in a fragmented one. Our results show that fragmentation can trigger sizable price changes, particularly for minerals critical to the clean energy transition–such as lithium, cobalt, and copper–as well as for key agricultural commodities like soybeans. The economic relevance of commodity trade fragmentation, measured by changes in consumer and producer surplus, varies across countries, but can be substantial. For the world as a whole, offsetting effects across commodity exporting and importing countries imply modest surplus losses.
Supporting SMEs during COVID-19: The case for targeted equity injections, Economic Letters, 2022
with Federico J. Diez and Romain Duval
We analyze the potential role of equity injections in addressing solvency risks among small and medium-sized enterprises (SMEs) after the COVID-19 crisis. Building on firm-level balance sheet projections for a sample of European economies, we simulate selected policy interventions and find that equity injections are quite effective at dampening the rise in insolvencies. Cost effectiveness requires careful targeting, however; under an illustrative scenario, leaving aside any costs arising from imperfect information and implementation, the cost of a program targeting only those SMEs worth saving is just a tenth of the cost of an untargeted approach directed to all insolvent firms. Overall, our paper provides a case for governments to rely more on targeted equity injections in responding to major shocks that trigger mass solvency risks.
What is the Impact of Increased Business Competition? R&R Journal of Political Economy: Macroeconomics
with Sonia Felix (Banco de Portugal) and Lidia Smitkova (University of Oxford)
This paper studies the macroeconomic effect and underlying firm-level transmission channels of a reduction in business entry costs. We provide novel evidence on the response of firms’ entry, exit, and employment decisions. To do so, we use as a natural experiment a reform in Portugal that reduced entry time and costs. Using the staggered implementation of the policy across the Portuguese municipalities, we find that the reform increased local entry and employment by, respectively, 25% and 4.8% per year in its first four years of implementation. Moreover, around 60% of the increase in employment came from incumbent firms expanding their size, with most of the rise occurring among the most productive firms. Standard models of entry, exit, and firm dynamics, which assume a constant elasticity of substitution, are inconsistent with our findings of expansionary and heterogeneous response across incumbent firms. We show that a model with heterogeneous firms and variable markups accounts for our evidence. In this framework, the most productive firms face a lower demand elasticity and increase their employment in response to the entry of new firms.
Commodities Trade Fragmentation and Market Power
with David Dongyoon Shin (UTennessee) and Alexandre Sollaci (IMF)
Dissecting the Decline in Investment Rates: Shocks vs Responsiveness
with Alberto Ferreira (EUI) and Diaa Noureldin (IMF)
Industrial Policy: Managing Trade-Offs to Promote Growth and Resilience
with Shekhar Aiyar, Hippolyte Balima, Mehdi Benatiya Andaloussi, Thomas Kroen, Rafael Machado Parente, Yu Shi, and Sebastian Wende
Chapter 3 in the October 2025 World Economic Outlook. IMF 2025.
Slowdown in Medium-Term Growth: What Will it Take to Turn the Tide?
with Nan Li, Chiara Maggi, Diaa Noureldin, Cedric Okou, Alexandre B. Sollaci, and Robert Zymek
Chapter 3 in the April 2024 World Economic Outlook. IMF 2024.
Fragmentation and Commodity Markets: Vulnerabilities and Risks
with Jorge Alvarez, Mehdi Benatiya Andaloussi, Christopher Evans, Marika Santoro, Alexandre Sollaci, Martin Stuermer and Petia Topalova (all IMF)
Chapter 3 in the October 2023 World Economic Outlook. IMF 2023.
Additional Coverage: IMF Blog
Chapter 1 in the April 2023 World Economic Outlook. IMF 2023.
Inflation Peaking Amid Low Growth
with Mehdi Benatiya Andaloussi, Niels-Jakob Harbo H Hansen and Daniel Leigh (all IMF)
January 2023 World Economic Outlook Update. IMF 2023.
Inclusiveness, Growth and Stability
with Xin Tang (IMF)
Chapter 2 in "Promoting Inclusive Growth in the Middle East and North Africa". IMF 2022.
with Federico J. Diéz, Romain Duval, Jose Carrido, Sebnem Kalemli-Ozcan, Maria Soledad Martinez Peria, and Nicola Pierri.
IMF Staff Discussion Note No. SDN/2021/002; April 2021
see also the IMF blog article here and Box 1.3. Rising Small and Medium Enterprise Bankruptcy and Insolvency Risks: Assessment and Policy Options, WEO October 2020, Chapter 1
Rising Corporate Market Power: Emerging Policy Issues
with Ufuk Akcigit, Wenjie Chen, Federico J. Diéz, Romain A Duval, Philipp Engler, Jiayue Fan, Marina Mendes Tavares, Daniel A Schwarz, Ippei Shibata, Carolina Villegas-Sanchez
IMF Staff Discussion Note No. SDN/2021/001; March 2021
with Chi Mai Dao (IMF), IMF Working Paper 18/262
Brief Abstract: We document a rise in gross savings and net lending of non-financial corporations across major industrialized countries over the last two decades. Using cross-country and firm-level data, we show that it is mostly driven by rising profitability and falling financing costs. On the other hand, higher corporate savings have not supported a commensurate increase in fixed capital investment. Instead, they led to a build-up of liquid financial assets (cash) on corporate balance sheets.