Research

Fields of Interest:


Macroeconomics of Imperfect Capital Markets, International Finance, Public Finance 

Working Papers:

Accounting for Debt Service: The Painful Legacy of Credit Booms [PDF], with Mathias Drehmann and Mikael Juselius, June 2017.
Credit booms imply predictable future debt service, forecasting recessions and triggering higher crisis risk.

Macroprudential Regulation Versus Mopping Up After the Crash [PDF | NBER WP], with Olivier Jeanne, R&R, Review of Economic Studies.
It is optimal for policymakers to use a mix of ex-ante prudential measures and ex-post stimulus measures in response to financial crises risk

Currency Wars or Efficient Spillovers? A General Theory of International Policy Cooperation [PDF], Dec. 2016
Provides a benchmark result for when the spillovers from national economic policymaking are globally efficient

Risk-Taking Dynamics and Financial Stability [PDF], with Martin Nowak, Dec. 2016
The dynamics of risk-taking in the financial sector are driven by compositional effects, leading to novel effects of financial policy

Thoughts on DSGE Macroeconomics [PDF Cartoon | Chinese version], Oct. 2015, prepared for Joe Stiglitz's festschrift conference
Macroeconomics would benefit from greater methodological diversity

Capital Controls and Currency Wars [PDF], Feb. 2013
Studies spillover effects of capital account interventions and implications for policy coordination - cited in the Economist's Free Exchange

Managing Credit Booms and Busts: A Pigouvian Taxation Approach [2010 NBER WPMatlab code], with Olivier Jeanne
A dynamic model of counter-cyclical macro-prudential regulation for credit markets - cited in Economist's Economics Focus, WSJ.com

Regulating Capital Flows to Emerging Markets: An Externality View [PDF | Video], May 2010
Foundations for prudential capital controls to reduce the risk of financial crises in emerging economies

Insurance Properties of Local and Foreign Currency Bonds in Small Open Economies [PDF], July 2009
Local currency and dollar bonds achieve full insurance in standard small open economy models

Excessive Dollar Borrowing in Emerging Markets: Balance Sheet Effects and Macroeconomic Externalities [PDF], April 2007, updated 2011
Emerging market borrowers take on too much dollar debt because they don't internalize the contribution to financial fragility

Work in Progress:  [contact me for preliminary versions]

Financial Innovation for Rent Extraction

Publications:

Pecuniary Externalities in Economies with Financial Frictions [PublicationPDF WP | Appendix | Slides], with Eduardo Dávila, forthcoming, Review of Economic Studies, Jan. 2017.
Develops a general methodology to categorize & characterize pecuniary externalities from both imperfect risk-sharing and collateral constraints
Note: this paper subsumes my earlier working paper on "Systemic Risk-Taking: Amplification Effects, Externalities, and Regulatory Responses" [2011 ECB WP | 2012 update] and was previously also circulated under the title "Fire-Sale Externalities."

Liquidity Trap and Excessive Leverage [PublicationPDF WP | Appendix | Blog], with Alp Simsek, American Economic Review 106(3), pp. 699-738, Mar. 2016.
Deleveraging leads to aggregate demand externalities at the ZLB that call for macroprudential regulation - cited in the WSJ

Capital Controls or Macroprudential Regulation? [Publication | PDF WP | IMF WP], with Damiano Sandri, Journal of International Economics 99(S1),  pp. 27-42, Mar. 2016.
Both instruments are needed in emerging economies that are at risk of financial instability because of large capital inflows

Undervaluation through Foreign Reserve Accumulation: Static Losses, Dynamic Gains [Publication2010 WB WP | update | VoxEU Op-Ed], with Luis Servén, Journal of International Money and Finance 64, pp. 104-136, Feb. 2016.
Reserve accumulation may trigger positive learning-by-doing externalities in the tradable sector and improve welfare

The Redistributive Effects of Financial Deregulation, [Publication | BIS WP IMF WP | Slides | Video], with Jonathan Kreamer, Journal of Monetary Economics 68, pp. S55-67, Dec. 2014.
Financial deregulation allows the financial sector to extract larger rents from the rest of society

From Sudden Stops to Fisherian Deflation: Quantitative Theory and Policy [Publication | PDF WP | Data and Matlab codes], with Enrique Mendoza, Annual Review of Economics 6, pp. 299-332, Aug. 2014.
Provides an introduction to quantitive models and the empirics of sudden stops, with ample online resources

Capital Flows, Crises and Externalities [PDF WP | Book], Chapter 5 in Allen, Franklin et al., Proceedings of the 16th IEA World Congress, Volume III, Palgrave Macmillan, Nov. 2012.
A primer that develops a simple formal model of emerging market balance sheet crises, externalities and capital flow regulation

The New Economics of Prudential Capital Controls [PDF WP | Publication | Kindle], IMF Economic Review 59(3), pp. 523-561, August 2011. Also IMF Working Paper 11/298..
An introduction to the emerging new literature on prudential capital controls in emerging economies, cited in the FT's Economists' Forum and the Economist's Free Exchange

Hot Money and Serial Financial Crises [PDF WP | Publication | Slides], IMF Economic Review 59(2), pp. 306-339, June 2011. 
Crises in one area of the world economy cause "hot money" to flow into other areas and create the risk of serial financial crises

Foreign Currency Debt, Risk Premia and Macroeconomic Volatility [PDF WP | Publication], European Economic Review 55, pp. 371-385, April 2011.

Decoupling and Recoupling [PDF WP | Publication], with Agustin Roitman and Carlos Vegh, American Economic Review P&P 100(2), pp. 393-397, May 2010. Also NBER Working Paper w15907.

Excessive Volatility in Capital Flows: A Pigouvian Taxation Approach [PDF WP | Publication | Online Appendix], with Olivier Jeanne, American Economic Review P&P 100(2), pp. 403-407, May 2010. Also NBER Working Paper w15927.

Dividend Taxation and Intertemporal Tax Arbitrage [PDF WPPublication], with Joseph E. Stiglitz, Journal of Public Economics 93(1-2), pp. 142 - 159, Feb. 2009. Also NBER Working Paper w13858

An Econometric Method of Correcting for Unit Nonresponse Bias in Surveys [PDF WP], with Johan Mistiaen and Martin Ravallion, Journal of Econometrics, 136(1), pp. 213 - 235, Jan. 2007. Also World Bank Policy Research Working Paper No. 3711.

Survey Nonresponse and the Distribution of Income [PDF WP | Matlab code], with Johan Mistiaen and Martin Ravallion, Journal of Economic Inequality 4(1), pp. 33 - 55, April 2006. Also World Bank Policy Research Working Paper No. 3543.

The Potential Consequences of Alternative Exchange Rate Regimes: A Study of Three Candidate Regions [PDF WP], with Eduard Hochreiter and Pierre L. Siklos, International Journal of Finance & Economics 8(4), pp. 327 - 349, Sept. 2003. Also OeNB Working Paper 76.

Other Publications

A Framework for Costing the Lowering of Antimicrobial Use in Food Animal Productionwith Anthony D. So, Reshma Ramachandran, David C. Love, Jillian P. Fry and Christopher D. Heaney, Commissioned paper for the UK Review on Antimicrobial Resistance, May 2016.

Macroprudential Policy Beyond Banking Regulation, with Olivier Jeanne, Banque de France Financial Stability Review n°18, pp. 163-172, April 2014.

Multilateral Aspects of Managing the Capital Account, with Jonathan Ostry and Atish R. Ghosh, IMF Staff Discussion Note 12/10, September 2012.  See associated academic paper.

Emerging market economies after the crisis: trapped by global liquidity? in Volz, Ulrich (ed.), Financial Stability in Emerging Markets: Dealing with Global Liquidity, German Development Institute, pp. 35 - 39, April 2012.

Regulating Capital Flows: Design and Implementation Issues [PDFVoxEU]December 2010.

Managing Credit Booms and Busts [VoxEU], with Olivier Jeanne, November 2010.

Older Papers

Expectations and Exchange Rates [PDF], with Hamid Rashid, July 2006
        Changes in expectations about macro variables from the Economist Poll of Forecasters explain exchange rate movements