"Commodity Prices, Sovereign Risk, and Macroeconomic Stability" (Job Market Paper)
(Updated draft coming soon!)
This paper studies how commodity price fluctuations affect sovereign risk and macroeconomic stability in commodity-exporting emerging economies and how fiscal rules shape the transmission of these effects. Empirically, I show that increases in commodity prices reduce interest rate spreads, although the magnitude of this effect depends on the fiscal rule in place. Motivated by this evidence, I develop a sovereign default model with endogenous fiscal policy governed by a structural budget balance rule. The model features a commodity-exporting sector facing persistent commodity price cycles. Using the model calibrated to Chile, I show that interest rate spreads depend not only on the level of commodity prices but also on the expected duration of commodity price cycles. Finally, I show that stricter fiscal rules strengthen debt sustainability while reducing the volatility of government spending and the trade balance.
Awards:
(1) Dr. Walter J. Primeaux Jr. and Natalie A. Primeaux Scholarship, University of Houston.
(2) Best Third-Year Paper Award, Department of Economics, University of Houston.
"Sovereign Default under Commodity Price Uncertainty: The Role of Structural Shocks in Metal Markets"
(Draft coming soon)
I study how different sources of copper price fluctuations affect sovereign risk. I identify structural copper supply, aggregate demand, and copper-specific demand shocks using a structural VAR with sign restrictions. I then estimate their dynamic effects on sovereign risk using local projections in a panel of 31 net copper-exporting economies. The results show that aggregate demand shocks generate the largest and most persistent reductions in sovereign risk, whereas copper supply shocks increase sovereign risk at medium horizons and copper-specific demand shocks have limited short-run effects but increase sovereign risk over longer horizons. These effects are significantly stronger in economies with greater exposure to copper exports, where copper supply shocks generate substantially larger increases in sovereign risk and aggregate demand shocks produce larger declines. The findings indicate that the effects of commodity price shocks on sovereign risk depend both on the source of the shock and on countries' degree of exposure to commodity exports.
"Government Transfers and Financial Incentives on Retirement Choices"
I evaluate the effects of government transfer programs on retirement decisions using quasi-experimental methods (difference-in-differences) with large-scale micro-level administrative data.
"Fiscal Sustainability of the Sovereign Pension Reserve Fund: Financial Projections 2020-2050" (with L. González), Fiscal Studies Series N° 2020/10, Ministry of Finance, Chile, 2020. (In Spanish) Media Coverage.
"A Projection Model for the Solidarity Pension System" (with L. González), Annual Public Finance Report 2019, Chapter 4, pages 78-92, Ministry of Finance, Chile, 2018. (In Spanish)
"Assessing the Financial Sustainability of the Collective Pension System" (with L. González), Annual Public Finance Report 2018, Chapter 4, pages 78-97, Ministry of Finance, Chile, 2017. (In Spanish)
"Sick-Leave Insurance in Chile: Diagnosis and Policy Proposals" (with I. Poblete), Working Papers Series N°10, Social Security Regulatory Authority, Chile, 2017. (In Spanish)
"An Analysis of Mental Health-Related Leaves of Absence from Work in Chile", Policy Reports, Social Security Regulatory Authority, Chile, 2016. (In Spanish)