Research

Publications

Working Papers

Works in Progress
  • "Household Portfolio Accounting," with Chris Telmer and Siqiang Yang.
What accounts for the large heterogeneity in household portfolio composition in the United States? We consider a standard life-cycle model with labor income risk and portfolio choice (Cocco et al. 2005), augmented with a savings wedge that lowers the return on saving and a risky wedge that lowers the relative return on risky assets. Using U.S. survey data (2004-2016), we compute household-level wedges that rationalize the data, in the spirit of Chari et al. (2007). This paper has two main contributions. First, we use the wedges to guide plausible frictions that researchers should consider. Second, we analyze the extent to which household characteristics can account for the wedges. For example, we find that risky wedges are smaller for college graduates, home owners, and self-employed households, but larger for white households.
  • "Optimal Bailouts in Banking and Sovereign Crises," with Zeynep Kabukcuoglu, Chengying Luo, and Cesar Sosa-Padilla.
We study the optimal design of bailout policies in the presence of banking and sovereign crises. First, we use European data to document that asset guarantees (i.e. conditional capital injections) are the most prevalent way in which sovereigns intervene in distressed banking sectors. Then, we build a model of sovereign borrowing with limited commitment where domestic banks hold government debt and also provide credit to the private sector. Shocks to the banks' capital can trigger banking crises and so the government may find it optimal to extend guarantees over those assets. Larger bailouts improve domestic financial markets and increase output, but they also imply larger fiscal needs for the government and may end 
up increasing default risk.
  • "The Stages of Economic Growth Revisited," with Daniela Costa, Timothy J. Kehoe, Gajendran Raveendranathan, Kim J. Ruhl.
Following Rostow (1960), we propose a theory for classifying countries according to their stages of growth and for analyzing the determinants of growth in and between the different stages. We conclude that, even if they have inefficient institutions and policies, poorer countries can achieve rapid growth by adopting the technologies and managerial practices of countries like the United States. Rostow (1960) hypothesized that taking off into economic growth was a difficult task for countries in the 19th Century, requiring major changes in institutions. In the 20th Century, however, as the United States and other advanced countries became richer because of improvements in technologies and managerial practices, it became easier for poor countries to take off into rapid growth by adopting some of these improvements. As they become richer, however, their growth rates will decline unless these countries have efficient institutions and policies. For many countries, this requires that they undertake serious institutional and policy reforms. Our analysis further suggests that world economic leadership is unlikely to be provided by less-developed countries like China. 


Discussions
  • "Inequality, Redistribution, and Optimal Trade Policy: A Public Finance Approach," by Roozbeh Hosseini and Ali Shourideh, ITAM-PIER Conference on Macroeconomics, August 2019. (slides)
  • "Misallocation under Trade Liberalization," by Yan Bai, Keyu Jin, and Dan Lu, IMF-Atlanta Fed Workshop on "China in the Global Economy," September 2018. (slides)
  • "Sovereign Cocos and the Reprofiling of Debt Payments," by Juan Carlos Hatchondo, Leornardo Martinez, Yasin Kursat Onder, and Francisco Roch, IM-TCD-ND Workshop on International Macro and Capital, June 2017. (slides)