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Work in Progress

On the Interactions between Monetary and Macroprudential Policies  
joint with Jorge Abad, Hervé Le Bihan and Galo Nuño

Climate Risk to Financial Stability
joint with Enric Martorell 

Wedges: Taxes vs Policies. A cross-country analysis 
joint with Paulina Restrepo-Echavarria, Lee Ohanian, Mark Wright

Working Papers

Mortgage Securitization and Information Frictions in General Equilibrium  [Paper]  [Slides]
Working Paper Banco de España here 
2021 runner-up  best paper of the XXVI meeting of Central Bank Research Network by CEMLA
2019 Winner of the AREUEA Homer Hoyt Doctoral Dissertation Award

I develop a macro model of the U.S. housing finance system that delivers an equilibrium connection between the securitization and mortgage credit markets. An endogenous securitization market has the dual role of reallocating illiquid assets and providing liquidity to fund mortgage lending. However, its benefits are hindered by originators' private information about loan quality. Fluctuations in household credit risk endogenously induce expansion and contractions of mortgage credit through the securitization liquidity channel. 

The Amplification Effects of Adverse Selection in Mortgage Credit Supply  [Paper]
R&R Journal of Housing Economics

This paper studies how information frictions in the securitization market amplify the response of mortgage credit supply to house price shocks. I model securitization as an optimal contracting problem between investors and banks. Investors are uninformed about the risk of mortgages they buy from banks, leading to an adverse selection problem. Banks face stochastic mortgage repayment rates and are less efficient than security investors at managing mortgages. 

Using a novel panel data set of tax variables for all states in the U.S. we document that the average corporate income tax rate has declined by approximately 40\% from 1980 to 2016. At the same time, we observe that most states have gradually shifted towards imposing a sales-only apportionment weight on multi-state firms. We ask whether these patterns are consistent with states competing in setting their corporate tax policy. Empirically, we find evidence of strategic interaction in setting tax policies between neighboring states. Theoretically, we show that moving towards a sales-only apportionment scheme is consistent with the prediction of a dynamic general equilibrium model of tax competition that incorporates the Formula Apportionment rule.

Academic Publications

Countercyclical Fiscal Rule, an Analysis for Chile 

Revista Compendium. Cuadernos de Economía y Adminisitración. Vol. 3 Núm 5 (2016)

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How efficient are countercyclical fiscal rules? I study the role of countercyclical fiscal rules, for small and open commodity-exporting economies, in stabilizing output and real exchange rate fluctuations. I propose a fiscal expenditure rule based on a country’s output gap, and on the commodity-price gap, along the lines of the Chilean structural fiscal rule launched in 2001. My framework encompasses the Chilean rule, in which government expenditure is acyclical, by covering alternatives that allow for explicit countercyclical expenditure. I embed the proposed rule in a small-open-economy DSGE model calibrated to match key features of the Chilean economy. I find that the proposed rule can reduce output volatility by one-third and real exchange rate volatility by 10 percentages compared to a benchmark scenario in which fiscal expenditure is acyclical.

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