The Value of Information in Credit Markets, January 2006. (Matlab Codes)
We study firm and industry dynamics in economies where there is asymmetric information
about the firms' survival probability. Young firms grow as they acquire financial
reputation in credit markets through two channels: selection and screening. Our economy
exhibits several features of firm and industry dynamics documented for the U.S.
Importantly, while information problems undermine production of young firms, general
equilibrium forces induce old firms to produce more, thereby largely offsetting the
adverse effect of asymmetric information on aggregate output.
Renegotiation, Collective Action Clauses and Sovereign Debt Markets, with Federico Weinschelbaum.
Journal of International Economics 67, 2005, pp. 47-72. Note on the Cournot equilibria.
Collective action clauses (CACs) are provisions specifying that a supermajority of
bondholders can change the terms of a bond. We study how CACs determine governments'
fiscal incentives, sovereign bond prices and default probabilities in environments with
and without contingent debt and IMF presence. We claim that CACs are likely to be an
irrelevant dimension of debt contracts in current sovereign debt markets because of the
variety of instruments utilized by sovereigns and the implicit IMF guarantee. Nonetheless,
under a new international bankruptcy regime like that recently proposed by the IMF, CACs
can increase significantly the cost of borrowing for sovereigns, contrary to what is
suggested in previous empirical literature.
Wealth as a Determinant of Comparative Advantage. American Economic Review, March 2005.
This paper shows that a country's wealth drives its comparative advantage when sectors in
the economy face differential access to credit. Wealthier nations exhibit a comparative
advantage toward goods produced in sectors facing more severe financial imperfections.
These sectors are typically populated by small firms. Empirically this paper documents
that those sectors are also labor intensive. Consequently this theory partially offsets
traditional sources of comparative advantage and offers an explanation for Trefler's
missing trade mystery and the Leontief paradox. Furthermore, the theory makes the relation
between trade and income distribution endogenous.
Information Capital, Firm Dynamics and Macroeconomic Performance, December 2002. (Matlab Code.)
I examine the role of information capital accumulation in the firm dynamics and
macroeconomic performance in economies where firms face repeated adverse selection in
credit markets. With asymmetric information, it takes time for good firms to build up
financial reputation and net worth. Over time the best firms pay lower interest rates and
grow at a speed positively associated with macroeconomic conditions. An unexpected temporary
shock partially destroys the firms' net worth, slowing down the accumulation of information
capital and weakening overall output performance. This channel is shown to be responsible
for generating strong endogenous persistence and amplification at the aggregate level. Both
aggregate and firm dynamics are consistent with stylized facts.
Savings to Growth: An Analysis of Competing Policies (in Spanish), August 1997.
A Decade of Convertibility, November 2002. Prepared for a roundtable on 2001 Argentina's Crisis at Duke University.
Interest Rates in Argentina: Levels and Spreads (in Spanish). August 1996.
Contracting out in the Buenos Aires Province (in Spanish). September 1995. Co-authored.
Determinants of Government Expenditure Growth (in Spanish). September 1995. Co-authored.
Standard Budget and Relative Efficiency among Argentinean Provinces (in
Spanish). July 1995. Co-authored.