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Firm-size distribution and cross-country income differences
In: NBER working paper series 14060
"We investigate, using firm level data for 79 developed and developing countries, whether differences in the allocation of resources across heterogeneous plants are a significant determinant of cross-country differences in income per worker. For this purpose, we use a standard version of the neoclassical growth model augmented to incorporate monopolistic competition among heterogeneous firms. For our preferred calibration, the model explains 58% of the log variance of income per worker. This figure should be compared to the 42% success rate of the usual model"--National Bureau of Economic Research web site
Nominal versus indexed debt: a quantitative horse race
In: NBER working paper series 13131
The main arguments in favor and against nominal and indexed debt are the incentive to default through inflation versus hedging against unforeseen shocks. We model and calibrate these arguments to assess their quantitative importance. We use a dynamic equilibrium model with tax distortion, government outlays uncertainty, and contingent-debt service. Our framework also recognizes that contingent debt can be associated with incentive problems and lack of commitment. Thus, the benefits of unexpected inflation are tempered by higher interest rates. We obtain that costs from inflation more than offset the benefits from reducing tax distortions. We further discuss sustainability of nominal debt in developing (volatile) countries.
Debt maturity: is long-term debt optimal?
In: NBER working paper series 13119
We model and calibrate the arguments in favor and against short-term and long-term debt. These arguments broadly include: maturity premium, sustainability, and service smoothing. We use a dynamic equilibrium model with tax distortions and government outlays uncertainty, and model maturity as the fraction of debt that needs to be rolled over every period. In the model, the benefits of defaulting are tempered by higher future interest rates. We then calibrate our artificial economy and solve for the optimal debt maturity for Brazil as an example of a developing country and the U.S. as an example of a mature economy. We obtain that the calibrated costs from defaulting on long-term debt more than offset costs associated with short-term debt. Therefore, short-term debt implies higher welfare levels.
Optimal reserve management and sovereign debt
In: NBER working paper series 13216
Most models currently used to determine optimal foreign reserve holdings take the level of international debt as given. However, given the sovereign's willingness-to-pay incentive problems, reserve accumulation may reduce sustainable debt levels. In addition, assuming constant debt levels does not allow addressing one of the puzzles behind using reserves as a means to avoid the negative effects of crisis: why do not sovereign countries reduce their sovereign debt instead? To study the joint decision of holding sovereign debt and reserves, we construct a stochastic dynamic equilibrium model calibrated to a sample of emerging markets. We obtain that the reserve accumulation does not play a quantitative important role in this model. In fact, we find the optimal policy is not to hold reserves at all. This finding is robust to considering interest rate shocks, sudden stops, contingent reserves and reserve dependent output costs.
Capital flows in a globalized world: the role of policies and institutions
In: NBER working paper series 11696
Sovereign Debt Restructuring: Evaluating the Impact of the Argentina Ruling
In: Harvard Business Law Review (Forthcoming)
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Inflation, openness, and exchange-rate regimes
In: Journal of development economics, Band 77, Heft 1, S. 229-249
ISSN: 0304-3878
On the Political Economy of Temporary Stabilization Programs
In: Economics & politics, Band 14, Heft 2, S. 133-161
ISSN: 1468-0343
This paper provides a political economy explanation for temporary exchange‐rate‐based stabilization programs by focusing on the distributional effects of real exchange‐rate appreciation. I propose an economy in which agents are endowed with either tradable or non‐tradable goods. Under a cash‐in‐advance assumption, a temporary reduction in the devaluation rate induces a consumption boom accompanied by real appreciation, which hurts the owners of tradable goods. The owners of non‐tradables have to weigh two opposing effects: an increase in the present value of non‐tradable goods wealth and a negative intertemporal substitution effect. For reasonable parameter values, owners of non‐tradables are better off.
On the Political Economy of Temporary Stabilization Programs
In: Economics & politics, Band 14, Heft 2, S. 133-162
ISSN: 0954-1985
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Working paper
Special Economic Zones in India: Public Purpose and Private Property (A)
In: Institutions, Institutional Change and Economic Performance in Emerging Markets, S. 53-88
Foreign Direct Investment, Finance, and Economic Development
In: Chapter for the Encyclopedia of International Economics and Global Trade, Forthcoming
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Deregulation, Misallocation, and Size: Evidence from India
In: Harvard Business School BGIE Unit Working Paper No. 13-056
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Working paper