Research
Publications
Retail sales of durable goods, inventories and imports after large devaluations
Journal of Economic Dynamics and Control, 2019, Volume 108, 103765
This paper presents a general equilibrium model of a small open economy with monopolistically competitive retailers, inventories and durable goods. Following large devaluations, this model generates a collapse of imports, a fall of retail sales and inventories and a gradual increase in retail prices. Besides, the model provides an explanation for a short-lived spike in retail sales of durable goods, observed during the recent devaluation episode in Russia in December of 2014.
International risk sharing and optimal monetary policy in a small commodity-exporting economy
Russian Journal of Money and Finance, 2019, 78(2): 3–27
This paper evaluates the welfare implications of the alternative monetary policy regimes for a small commodity-exporting economy. In line with the existent literature, welfare analysis shows that fixed nominal exchange rate is dominated in general by a flexible exchange rate regime. However, it is shown that the welfare costs of the nominal peg vary crucially with the extent of international risk sharing. In a model with complete and frictionless asset markets, the real exchange rate volatility is small and welfare losses from the nominal peg are negligible. By contrast, under financial autarky, the fixed nominal exchange rate generates significant volatility of inflation and results in large welfare costs. I also consider the welfare properties of flexible regimes showing that core consumer inflation targeting and non-commodity domestic inflation targeting are not optimal in general, though their welfare costs are small comparing to fixed regime. Further, the welfare ranking of these two regimes might depend on the currency in which the tradable goods are priced (producer currency pricing vs. local currency pricing).
The effects of global shocks on small commodity-exporting economies. Lessons from Canada
American Economic Journal: Macro, 2014, 6(2): 207-237 (with Juan J. Dolado)
Online Appendix, MATLAB code & data, CEPR Discussion Paper DP8825 (older version)
We propose a structural dynamic factor model of a small commodity-exporting economy, using Canada as a representative case study. Combining large panel datasets of the global and domestic economies, sign restrictions are used to identify relevant demand and supply shocks that explain volatility in real commodity prices. We quantify their dynamic effects on a wide variety of Canadian macro variables. We are able to reproduce all the main stylized features at business-cycle frequencies documented in the literature on this type of economies. These include a Dutch disease effect which has proven hard to find in empirical studies.
Working Papers
Monetary and exchange rate policy in emerging market economies: evidence from Mexico
This paper presents a Bayesian SVAR model of an emerging market economy using Mexico as a representative case study. Following the methodology of Baumeister and Hamilton (2015), I use sign restrictions combined with prior information on the values of structural parameters to identify the effects of exchange rate, monetary policy and international reserves shocks on the Mexican economy. The model is estimated for the periods before and after the adoption of an inflation targeting framework in 2001 and confirms a significant change in the implementation of monetary and exchange rate policies in Mexico during this period. The effects of monetary policy, exchange rate and international reserves shocks are broadly consistent with economic theory. Besides, the paper confirms a weaker pass-through of exchange rates to inflation and interest rates and more active role of the interest rate policy after the adoption of inflation targeting, as well as a strong contractionary effect of large negative exchange rate shocks.
Commodity price shocks and real business cycles in a small commodity-exporting economy
This paper analyzes an effect of the world commodity price shocks on business cycles in a small commodity-exporting economy. It is shown that model with complete markets, separable preferences and no financial frictions cannot generate the main stylized facts regarding this economy, in particular, volatile and negatively correlated with commodity prices real exchange rate, Dutch disease and a positive effect of commodity prices on investment. To replicate these facts frictions in asset trade were introduced into the model. They create a wedge between stochastic discount factors and marginal rates of substitution in consumption damping international risk sharing.