Research

Job market paper

"Carbon Emissions and the Transmission of Monetary Policy"

Abstract: This paper investigates the dynamic causal effects of monetary policy on carbon emissions in the United States through a Structural Vector Autoregression (SVAR) model. I find that, contrary to conventional wisdom, a contractionary monetary policy shock leads to a significant increase in total carbon emissions from energy consumption, even as economic activity declines. The impact is sizeable, as a 25-basis-point tightening leads to a rise in emissions of about one percent. This countercyclical response is driven by contrasting sectoral dynamics: whereas emissions from the industrial sector decline, as expected, emissions from non-industrial sectors rise significantly in the short run. A detailed analysis reveals that the channels of monetary policy transmission vary in strength and relevance across sectors and help explain these heterogeneous responses: while the conventional aggregate demand channel plays a central role in the response of industrial sector emissions, the evidence suggests a more significant role of commodity price and energy reallocation channels for the transmission of shocks to non-industrial sectors.

🏅 Best Paper presented by a Junior Researcher at the 2nd edition of the UEA ECO Time Series Workshop (May-2024).

Presented at: CREi Macroeconomics Lunch Workshop AY22-23 (Apr-2023), CREi Macroeconomics Lunch Workshop AY23-24 (Nov-2023), BSE PhD Jamboree 2024 (May-2024), 2nd edition of the UEA ECO Time Series Workshop (May-2024), 6th QMUL Economics and Finance Workshop for PhD and Post-doctoral Students (May-2024), Eighth Conference on the Econometric Models of Climate Change (EMCC VIII) (Aug-2024), National Academies' Workshop on the Macroeconomic Implications of Decarbonization Policies and Actions (Sep-2024), CREi Macroeconomics Lunch Workshop AY24-25 (Oct-2024), 7th Annual Meeting of CEBRA’s International Finance and Macroeconomics Program (Nov-2024), RES PhD Conference 2024 (Dec-2024), 2024 European Winter Meeting of the Econometric Society (Dec-2024), First Congress of the Latin American Association of Environmental and Natural Resource Economists (Mar-2025), Theories and Methods in Macro (T2M) (May-2025), 2025 International Energy Workshop (IEW) (Jun-2025).

Publications

"The Poor and the Rich: Preferences over Inflation and Unemployment" (with Marc Hofstetter). Journal of Money, Credit and Banking, 53(4), pp.875-895 (March, 2021).

Abstract: What are the tradeoffs that the public is willing to accept between inflation and unemployment? We find that people dislike extra points of unemployment more than extra points of inflation. This is true for both Europe and Latin America. For the latter, the aversion to unemployment relative to inflation is much greater. Moreover, in both regions, the poor's distaste for extra points of unemployment relative to inflation is significantly greater than that of the rich. This result contributes to the literature on the costs of inflation and questions the commonly held view that prescribes strong anti-inflationary postures as a way to implement policies consistent with the preferences of the poor.

See also this blog entry in BSE Voice, this blog post in Foco Económico (in Spanish) and the working paper.

"Ponzi schemes and the financial sector: DMG and DRFE in Colombia" (with Marc Hofstetter, Daniel Mejía and Miguel Urrutia†). Journal of Banking & Finance, 96, pp.18-33 (November, 2018).

Abstract: We use a novel dataset to estimate, for the first time in the literature, the effects of Ponzi schemes on the formal financial sector. DMG and DRFE, two Ponzi schemes that were shut down by the Colombian government in November 2008, had over half a million customers, who invested funds corresponding to 1.2% of Colombia's annual GDP. We find that pyramid costumers’ obtained more loans from the financial sector and their credit standings were better than those in the respective control groups while the schemes were operating. Afterwards, their loan stocks started to decrease and their ratings with the banking sector deteriorated. Prior to November 2008, deposits in the financial sector fell more in the municipalities more affected by the schemes.

See also this blog post in Foco Económico (in Spanish) and the working paper.

Working papers

"The Transmission of Climate Shocks: The Case of Floods in India" (with Alejandro Rábano)

Abstract: This paper relates to a recent literature on the propagation of natural disasters through input-output linkages. We combine manufacturing data from the Annual Survey of Industries in India for the years 2000-2007 with the flood archive from the Dartmouth Flood Observatory, and apply the empirical strategy suggested by de Chaisemartin and d'Haultfoeuille (2020). Output and capital decrease after the first flood hits a district, especially in areas with the lowest historical exposure. This suggests that adaptation plays a role in mediating the impact of extreme weather events. We also find that manufacturing industries that rely on agricultural inputs suffer a larger decrease in output and capital, and their output price increases, which provides evidence of a supply shock with persistent impacts. At the product level, we find some evidence of propagation through input-output linkages: when a high share of the production of a specific product is located in areas affected by extreme floods, establishments manufacturing the same type of product that are not directly affected experience an increase in the price and a decrease in the quantity produced.

Presented at: CREi International Lunch Workshop AY22-23 (Mar-2023), BSE PhD Jamboree 2023 (May-2023), PSE Summer School on Climate Change (Jun-2023), SAEe Simposio de la Asociación Española de Economía 2023 (Dec-2023).

"Lessons from a Bubble Burst" (with Marc Hofstetter) R&R at the Journal of Financial Literacy and Wellbeing

Abstract: In 2008 two Ponzi schemes were shut down by the Colombian government. Using microdata for a sample of almost a quarter of a million of their investors we (i) describe their socioeconomic characteristics and (ii) estimate the individual and household risk factors associated with making a profit from such scams. Our paper contributes to the household finances, financial education, and financial literacy literatures.

policy publications

"The African Continental Free Trade Area: Potential Economic Impact and Challenges" (with Lisandro Abrego, Mario de Zamaroczy, Tunc Gursoy, Garth P. Nicholls, and Hector Perez-Saiz). IMF Staff Discussion Notes No. 20/04. International Monetary Fund. (May, 2020).

Abstract: Political momentum towards Africa-wide free trade has been intensifying. In March 2018, over 40 countries signed the African Continental Free Trade Area (AfCFTA) agreement. Once fully implemented, the AfCFTA is expected to cover all 55 African countries, with a combined GDP of about US$2.2 trillion. This SDN takes stock of recent trade developments in Sub-Saharan Africa and assesses the potential benefits and costs of the AfCFTA, as well as challenges to its successful implementation. In addition to increased trade flows both in existing and new products, the AfCFTA has the potential to generate substantial economic benefits for African countries. These benefits include higher income arising from increased efficiency and productivity from improved resource allocation, higher cross-border investment flows, and technology transfers. Besides lowering import tariffs, to ensure these benefits, African countries will need reduce other trade barriers by making more efficient their customs procedures, reducing their wide infrastructure gaps, and improving their business climates. At the same time, policy measures should be taken to mitigate the differential impact of trade liberalization on certain groups as resources are reallocated in the economy and activities migrate to locations with comparatively lower costs.

"Trade Potential in Southern Cone Countries" (with Soledad Feal-Zubimendi, Fabiano Rodrigues Bastos and Daniel Hernaiz). IDB Technical Notes No. IDB-TN-01397. Inter-American Development Bank. (March, 2018).

Abstract: A trade gravity model is used to calculate the bilateral export potential of Southern Cone countries (Argentina, Brazil, Chile, Paraguay, and Uruguay) and identify patterns of weak performance across destinations and productive sectors. After controlling for key trade fundamentals and country and time effects, we find that exports to large advanced economies like the United States and the European Union fall short of expected levels. Potential trade with the rest of Latin America shows a high degree of heterogeneity across sectors and countries. Exports within the Southern Cone are generally above the predicted value, but there is still space for higher flows, particularly regarding Chile-MERCOSUR relations.

Work in progress

"The Rise of Market Power and the Flattening of the Phillips Curve" Draft available soon!

Abstract: In recent decades, the U.S. economy has exhibited two notable trends: (i) a steady increase in aggregate market power, measured through firm-level markups and profitability, and (ii) a flattening of the Phillips curve, which indicates a weakened relationship between inflation and real activity over the business cycle. However, the connection between these two trends is at odds with the predictions of the standard New Keynesian model. In this paper, I use a multi-sector model with production networks, incorporating heterogeneity in input-output linkages, the degree of nominal rigidities, and the degree of market power to reconcile these phenomena. Changes in sectoral markups affect the optimal demand for inputs across sectors and, consequently, the centrality of those sectors in the economy. The model predicts a New Keynesian Phillips curve that is a modified version of the one-sector model, where the characteristics of the network, sectoral price rigidities, and sectoral markups influence inflation dynamics. Quantitatively, variations in these factors can explain the flattening of the Phillips curve, with the largest effect coming from the increase in average market power.

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