Research

This paper studies how income inequality responds to commodity price shocks, identifying the underlying mechanisms at play. I provide novel cross-country evidence from commodity- exporting nations, showing that positive commodity price shocks reduce labor income inequality between skilled and unskilled workers. This reduction in inequality is primarily driven by a fall in the skill premium, arising from the expansion of unskilled-labor-intensive sectors, such as construction, which experience more rapid growth than skilled-labor-intensive ones, such as services. To interpret these results, I develop a quantitative multisector small- open-economy model that captures differences in skilled-labor intensity and sensitivity to commodity price shocks across sectors. I use the model as a laboratory to explore the distributional impacts of various policy responses to commodity windfalls, demonstrating how saving or spending these gains can either reinforce or moderate the reduction in inequality. This analysis provides new insights into the broader economic and social impacts of commodity price shocks in emerging markets. 

We document the macroeconomic patterns that characterize the recovery from financial crises. Using a sample of post-war recessions from around the world, we show that financial crises tend to be followed by jobless recoveries, with a sluggish recovery of employment relative to output. A departure from this empirical regularity tends to occur in emerging-market crisis episodes with high inflation, which feature a strong recovery of employment but persistent declines in real wages (or “wageless recoveries”). Our findings highlight the role of credit markets and inflation in shaping labor market recovery from recessions.

This paper studies the desirability of implementing price controls during inflation stabilization plans. To address this question, I develop a New Keynesian model with sticky information á la Mankiw-Reis (2002), which I use to assess the welfare costs associated with transitioning from a high-inflation to a low-inflation steady state. My findings show that even when the monetary authority commits to a new regime and agents do not anticipate future policy changes, welfare costs emerge during the transition due to firms’ gradual adaptation to the new regime. In this context, I introduce price controls as a policy tool aimed at mitigating the real costs of disinflation caused by information frictions. I then explore the trade-offs they create for policymakers. On the one hand, price controls offer macroeconomic benefits by coordinating prices during the transition, leading to a faster and less costly disinflation. On the other hand, they impose microeconomic costs by preventing firms from adjusting prices freely in response to idiosyncratic shocks. Ultimately, the optimality of price controls depends on the scale of the disinflation relative to the magnitude of the firm-level shocks.

Recently, the addition of hand-to-mouth (HtM) agents, whose consumption depends more or less directly on their income, has been seen as a source of amplification in business cycle models. Lost in this discussion is the fact that investment is by far the most cyclical component of aggregate income and investment is largely done by unconstrained agents. We consider a standard New Keynesian model with HtM agents and investment and study the impact of a monetary policy shocks. We find that under general conditions, an increase in the fraction of HtM agents tends to dampen the impact of monetary policy shocks.

We analyze how firms adjust their prices in response to changes in the minimum wage, focusing on Brazil, a large developing economy. We combine administrative employer-employee records with web-scraped prices from online retailers to construct a novel wage-price dataset at a fine industry-region level for the period 2011-2016. Our findings show that prices tend to rise more in regions and industries with greater exposure to minimum wage increases. We develop a model of price setting that generates a New Keynesian Philips Curve that captures the pass-through from minimum wage to prices. This model allows us to explore the broader macroeconomic implications of minimum wage policies in an open economy.