Research
Working Papers:
* Presentation by co-author. † Poster session. Includes scheduled conference.
Monetary and Exchange Rate Policies in a Global Economy Updated: 2024 July
This paper characterizes optimal cooperative monetary policy and foreign exchange intervention (FXI) in a general two-country model with currency market segmentation. When shocks are efficient, optimal monetary policy and FXI separately stabilize inflation and international consumption risk-sharing. However, when shocks are inefficient, this "dichotomy" breaks down and the two policies no longer have separate objectives. Optimal FXI insulates the inflation-output trade-off of monetary policy at the cost of distorting the risk-sharing and terms-of-trade in favor of the domestic economy over the foreign. FXI improves monetary policy independence and provides insurance from external shocks by allowing central banks to stabilize inflation without raising the domestic policy rate.
Presentations: (2024) EEA Annual Congress, Erasmus School of Economics; ES North American Summer Meeting, Vanderbilt University; 5th Emerging Market Macroeconomics Workshop, University of Poitiers; MMF PhD Conference, University of Surrey; MMF Annual Conference, University of Manchester; Doctoral Workshop on Quantitative Dynamic Macroeconomics, Aix-Marseille School of Economics; Cambridge PhD Macroeconomics Workshop & JBS Lunch Seminar
Intervening against the Fed Updated: 2024 April (under review)
Joint with Alexander Rodnyansky and Yannick Timmer
Paper Presentation Slide Poster
This paper studies the effectiveness and mechanism of foreign exchange interventions (FXIs) for mitigating US monetary policy spillovers. For identification, we combine deviations from a daily FXI policy rule with high-frequency US monetary policy shocks, daily exchange rates, firm-level stock prices, and firm-level balance sheet variables across multiple countries. We first present evidence that, without interventions, contractionary US monetary policy shocks spill over through a balance sheet channel: foreign exchange rates depreciate and stock prices fall, driven by those firms with US dollar debt. However, when countries counter-intervene, the spillover of a US monetary policy tightening is muted. FXIs entirely offset the depreciation of the domestic exchange rate and the reduction in stock prices for firms with US dollar debt, suggesting that ``intervening against the Fed'' protects economies from the adverse spillovers of US monetary policy tightening via the balance sheet channel of exchange rates.
Presentations: (2023) 2nd New York Fed 2nd Annual International Roles of the U.S. Dollar Conference; 9th BdF-BoE-BdI International Macroeconomics Workshop; EEA Annual Congress, Barcelona School of Economics; Econometric Society Asia Meeting, Tsinghua University (online); MMF Annual Conference, University of Portsmouth; Workshop on Empirical Macroeconomics, Ghent University†; SED annual meeting, Cartagena*; 1st annual conference of the Banco Central do Brazil*; IMIM Seminar; IMF; Federal Reserve Board, Cambridge JBS Lunch Seminar and CERF Cavalcade (2024) AEA Annual Meeting, San Antonio†; Joint BIS, BoE, ECB and IMF Spillover Conference; 2nd ERSA-CEPR Workshop on Macroeconomic Policy in Emerging Markets*; University of Cape Town*
Video and Conference Report at the New York Fed
Financial Market Globalization and Asset Price Bubbles
Abstract: We construct a two-country model of rational bubbles with asymmetric degrees of financial development. We show that whether financial globalization gives rise to bubbles crucially depends on the levels of financial development in the two countries. In economies with either developed or underdeveloped financial market relative to the foreign one, bubbles cannot arise under financial autarky but they can arise under financial globalization. Moreover, unlike previous literature, bubbles in sufficiently well-developed financial markets lead to welfare losses in other countries.
Presentations: (2020) Econometric Society World Congress, Bocconi University (online); EEA Annual Congress, Rotterdam (online); (2019) Econometric Society Australasian Meeting, Perth; Japan Economic Association Spring Meeting, Musashi University†; The University of Tokyo
Awarded honorable mention for best student paper award in finance, The University of Cambridge
Past paper:
Monetary Transmission under Heterogeneous Exchange Rate Exposure
Abstract: This paper empirically studies the transmission of U.S. monetary policy to emerging market economies (EMEs) when EME firms are heterogeneous in exposure to exchange rate risk. I find that firm size plays a crucial role in international monetary transmission. In response to a U.S. monetary tightening, large firms in EMEs reduce the share of dollar debt, as well as investments in capital and financial assets. This pattern is salient in countries with relatively flexible exchange rate regimes.
Presentations: (2023) AEA Annual Meeting, New Orleans†; (2022) Workshop on Empirical Macroeconomics, Ghent University†, The University of Cambridge