Research

Published Papers

Global capital flows and the role of macroprudential policy , joint with Sudipto Karmakark, Journal of Financial Stability (Vol 67, Aug 2023) 

Presented at: Bank of Portugal Research seminar (2018), Midwest Macroeconomic Meetings, Nashville (2018), Washington University Economics Graduate Students’ Conference, St. Louis (2018).

Working Papers

The Costs of Sovereign Default: A Bayesian Perspective

Abstract: What are the costs associated with defaulting on sovereign debt? In this paper I present a novel way to explore cross-country differences in default costs to estimate the risks associated with higher debt intolerance. I find that more debt intolerant countries are associated with lower GDP growth, less foreign direct investment, higher inequality and liquidity problems. A country's institutional setting is what sets apart these countries as more prone to default on sovereign debt. Using an estimated sovereign default model, I quantify that increased market perceptions can improve country's spreads by more than 85%.

Presented at: Bank of Portugal Exchance seminar (2018), Midwest Economics Meeting (2018) (expected), Indiana University Brown-bag (2017).

Sovereign Domestic debt and Sovereign External debt defaults (Draft coming soon!)

Abstract: This paper is motivated by two facts. First, for several economies, domestic public debt accounts for a large share of total public debt. Second, recent sovereign debt default episodes happened at seemingly low levels of external debt. I develop a dynamic model allowing for default on sovereign external debt and analyse the government’s optimal portfolio decision between bonds issued locally and bonds issued in international financial markets. The model can endogenously produce positive levels of both types of debt. The Sovereign government will issue bonds on international markets to postpone distortions from labor taxation. Domestic debt is also issued in positive amounts when the risk of default is sufficiently high and future consumption is expected to be low. Numerical simulations show how the model economy produces default episodes with low levels of external debt, but levels of domestic debt that reach 60% of total government debt.

Presented at: Jordan River conference, Indiana University.

Work in progress:

Macroprudential Policy and Resource Misallocation

Fundamentals and self-fulfilling bank runs