Working papers:
Identifying the Size of Open Market Operations in Foreign Exchange Interventions (joint with Paula Beltran) [draft] [ssrn] [slides]
Abstract: How large should open market operations be to stabilize exchange rates in foreign exchange interventions? In this paper, we leverage the mechanical rebalancings of the largest local-currency government bonds index for emerging countries (GBI-EM Global Diversified) to provide a valid identification on the required amount of foreign reserves an emerging market central bank should buy (or sell) in foreign exchange interventions. The rebalancings of GBI-EM Global Diversified create demand shocks on the currency composition of government bonds that are orthogonal to the macroeconomic fundamentals of the sovereign. We show that the rebalancings resemble the noise trader shocks in a segmented market model (Itskhoki-Mukhin 2021) and identify the required size of foreign exchange interventions to stabilize exchange rates. We find that in order to achieve a 1 percentage point exchange rate appreciation, the required intervention is 0.4% of annual GDP for a median country in our sample.
Conference and Seminar presentations: UChicago Macro-Finance Research (MFR), UCLA Economics Proseminar, WashU St. Louis EGSC, UCLA Anderson Finance, Midwest Macro Meeting Fall 2022, Inter-Finance PhD Seminar, Southwest Finance Conference 2023, North America Econometric Society Summer Meeting 2023*
Abstract: How large should open market operations be to stabilize exchange rates in foreign exchange interventions? In this paper, we leverage the mechanical rebalancings of the largest local-currency government bonds index for emerging countries (GBI-EM Global Diversified) to provide a valid identification on the required amount of foreign reserves an emerging market central bank should buy (or sell) in foreign exchange interventions. The rebalancings of GBI-EM Global Diversified create demand shocks on the currency composition of government bonds that are orthogonal to the macroeconomic fundamentals of the sovereign. We show that the rebalancings resemble the noise trader shocks in a segmented market model (Itskhoki-Mukhin 2021) and identify the required size of foreign exchange interventions to stabilize exchange rates. We find that in order to achieve a 1 percentage point exchange rate appreciation, the required intervention is 0.4% of annual GDP for a median country in our sample.
Conference and Seminar presentations: UChicago Macro-Finance Research (MFR), UCLA Economics Proseminar, WashU St. Louis EGSC, UCLA Anderson Finance, Midwest Macro Meeting Fall 2022, Inter-Finance PhD Seminar, Southwest Finance Conference 2023, North America Econometric Society Summer Meeting 2023*
``Too-Little" Sovereign Debt Restructurings (joint with Tamon Asonuma and Marcos Chamon)
Updated draft coming soon
Abstract: Sovereign debt restructurings often result in limited debt relief (``too little" problem), followed by repeated restructurings. We find that in 1975–2020, (i) preemptive restructurings are quicker with smaller haircuts but more likely to be ``non-cured," needing a second restructuring within five years; (ii) restructuring strategies and outcomes tend to follow the previous restructuring (are ``sticky"); (iii) ``cured" post-default restructurings have better GDP growth and debt dynamics over the long horizon than non-cured preemptive restructurings. A simple two-period model with two types of restructurings—prior to and after income realization—rationalizes these stylized facts. With possibility of full repayment after income realization, preemptive restructurings result in small haircuts leaving debt unsustainable afterwards.
Conference and Seminar presentations: UCLA Economics Proseminar, IMF Sovereign Debt Workshop, Princeton Sovereign Debt Research Conference*
*(scheduled)
Updated draft coming soon
Abstract: Sovereign debt restructurings often result in limited debt relief (``too little" problem), followed by repeated restructurings. We find that in 1975–2020, (i) preemptive restructurings are quicker with smaller haircuts but more likely to be ``non-cured," needing a second restructuring within five years; (ii) restructuring strategies and outcomes tend to follow the previous restructuring (are ``sticky"); (iii) ``cured" post-default restructurings have better GDP growth and debt dynamics over the long horizon than non-cured preemptive restructurings. A simple two-period model with two types of restructurings—prior to and after income realization—rationalizes these stylized facts. With possibility of full repayment after income realization, preemptive restructurings result in small haircuts leaving debt unsustainable afterwards.
Conference and Seminar presentations: UCLA Economics Proseminar, IMF Sovereign Debt Workshop, Princeton Sovereign Debt Research Conference*
*(scheduled)
Pre-Doctoral publications:
“Inheritance Taxation: Redistribution and Predistribution.” Research on Economic Inequality, Emerald Publishing, Vol. 26 (2018): pp. 1-13. (joint with Frank Cowell and Dirk Van de gaer)
“Force profiles for parallel plates partially immersed in a liquid bath.” Journal of Mathematical Fluid Mechanics, 17.1 (2015): 87-102. (Joint with Anna Aspley and John McCuan)
“Force profiles for parallel plates partially immersed in a liquid bath.” Journal of Mathematical Fluid Mechanics, 17.1 (2015): 87-102. (Joint with Anna Aspley and John McCuan)