I am an Assistant Professor in the Vancouver School of Economics at the University of British Columbia.
My research interest is in international macroeconomics, financial economics and information economics with a particular focus on the role of coordination failures and financial frictions.
I obtained my PhD in 2014 from New York University and my undergraduate degree in economics from the London School of Economics and Political Science.
For the up-to-date information please check my Personal Website
Please click on paper titles for abstracts and full text downloads.
(with Isabel Trevino)
Journal of Economic Theory 160, 2015, 387-428
We study costly information acquisition in global games (coordination games where payoffs are discontinuous in the unobserved state and in the average action of agents). We show that only symmetric equilibria exist and we provide sufficient conditions for uniqueness. We then characterize the value of information in this context and link it to the underlying parameters of the model. We explore the notion of equilibrium efficiency, complementarities in information choices and the trade-o¤ between public and private information. We show that the unique equilibrium of the game is inefficient and that strategic complementarities in actions do not always translate into strategic complmenetarities in information choices. Finally, we find that public and private information can be complements. These results are in contrast to the findings on beauty contest models (coordination games where payoffs depend continuously on the quadratic distance between individual actions and both the unobserved state and the average action of agents). We argue that these disparities are a result of differences in the value of additional information across these two classes of models. Therefore, our results emphasize the importance of the type of payoff structures (continuous versus discrete) in coordination games.
(with David Kohn and Fernando Leibovici)
forthcoming at International Economic Review
This paper studies the role of financial frictions as a barrier to international trade. We investigate new exporter dynamics in order to identify the extent to which these frictions affect export decisions. We study an economy with heterogeneous firms subject to financing constraints and working capital requirements, and calibrate it to match key moments from Chilean plant-level data. In contrast to standard models of international trade with sunk export entry costs, our model can account for new exporter dynamics. We find that financial frictions reduce the impact of a trade liberalization, suggesting that they constitute an important trade barrier.
How can a government avert a self-fulfilling debt crisis? To answer this question I develop a micro-founded model of sovereign default with dispersed beliefs and endogenous expectations. I use the model to study: (1) under which conditions an increase in taxes or fiscal stimulus decrease the likelihood of default, and (2) what role endogenous expectations and dispersed beliefs play in determining the effectiveness of these policy measures. I find the effects of these policies depend on the initial characteristics of the economy (such as the initial tax rate or debt-to-capital ratio) while adjustments in expectations amplify the response of the economy to policy changes. I also analyze how the above results change when there is uncertainty as to whether the government will implement announced policies. I show that the presence of such an uncertainty increases the appeal of austerity relative to stimulus, but overall reduces the effects of both policies.
(with David Kohn and Fernando Leibovici)
We study the role of financial frictions and balance-sheet effects in accounting for the dynamics of aggregate exports in large devaluations. We investigate a small open economy with heterogeneous firms, where firms face financing constraints and debt can be denominated in foreign units. We find that these channels can explain only a small fraction of the dynamics of exports observed in the data. While these frictions distort production and investment decisions, they affect exports significantly less since firms reallocate sales across markets in response to real exchange rate changes. We document the importance of this mechanism using plant-level data.
(with Isabel Trevino)
We study experimentally how changes in the information structure affect behavior in regime change coordination games with incomplete information (global games). We find two systematic departures from the theory: (1) the comparative statics of equilibrium thresholds and signal precision are reversed, and (2) as information becomes very precise subjects' behavior approximates the efficient equilibrium of the game, not the risk dominant one. To organize our findings we extend the standard global game model to allow for sentiments in the perception of strategic uncertainty and study how they relate to fundamental uncertainty. We test the extended model by eliciting first and second order beliefs and find support for the sentiments mechanism: Subjects are over optimistic about the actions of others when the signal precision is high and over pessimistic when it is low. Thus, we show how changes in the information structure can give rise to sentiments that drastically affect outcomes in coordination games. This novel mechanism can help explain stylized facts and offer policy guidance for environments characterized by strategic complementarities and incomplete information.
This paper provides a general analysis of comparative statics results in global games. I show that the effect of a change in any parameter of the global game model can be decomposed into the direct effect, which captures the effect of a change in parameters when agents' beliefs are held constant, and the multiplier effect, which captures the role of adjustments in agents' beliefs. I characterize conditions under which the multiplier effect is strong and relate it to the strength of strategic complementarities and the publicity multiplier emphasized in earlier work. Finally, I use the above insights to identify when comparative statics can be deduced from the model's primitives, when they do not depend on the information structure and, when they coincide with predictions of the complete information model.
This paper analyzes debt maturity structure for a borrower in a setting where creditors are faced with strategic uncertainty. In contrast to the existing literature, I examine the effects of strategic uncertainty on the issuance of debt in an environment where face values of debt are determined endogenously and directly affect investors rollover decisions. I find that strategic uncertainty has a strong effect on the decisions of both the rm and investors, especially at the rollover stage. As strategic uncertainty increases investors are less willing to roll over short-term debt and the borrower shifts towards long-term debt. Finally, I use the model to study the effects of a sudden deterioration in secondary markets and debt overhang issues on the debt maturity structure, face value of debt and default decisions.
(with Isabel Trevino)
We solve and test experimentally a global game of speculative attack where agents choose, at a cost, the precision of their private signal. We prove existence of a unique equilibrium in the coordination game and explore strategic incentives in information acquisition. In the experiment, we find that subjects follow the strategies suggested by the theory. However, contrary to our predictions, as signals become more precise the actions of subjects move towards efficiency and not risk dominance, which contradicts previous well known results of global games. We document empirically a path to convergence towards the efficient equilibrium under complete information.
WORK IN PROGRESS
Financial Frictions, Trade, and Misallocation (joint with Fernando Leibovici and David Kohn)
Isolating Limited Liability as a Financial Friction (with Jesse Perla and Carolin Pflueger)
This paper analyzes the effect of changing information structure in simple global games. I provide a complete characterization of the effect of private and public precision on the fundamental threshold. Interestingly, I find that away from the limiting case of infinitely precise signals, the threshold can be non-monotonic in both precision of public and private information. I provide intuition behind this result and argue that this has important policy consequences.
Information Acquisition and Welfare: Theory and Experiments (joint with Isabel Trevino)
ECON356 Introduction to International Finance Sections
Exchange rate policy regimes; international financial organizations; the interaction between monetary policy and exchange rate regimes; financial crises.
One fine body…