I am an economist at the International Monetary Fund, specializing in international finance. My research has broadly focused on global financial flows and their implications for rising household wealth inequality, corporate profits and foreign reserve policy

"Central Banks as Dollar Lenders of Last Resort: Implications for Regulation and Reserve Holdings," with Mitali Das, Gita Gopinath, and Jeremy Stein [December 2022]

Abstract: This paper explores how non-U.S. central banks behave when firms in their economies engage in currency mismatch, borrowing more heavily in dollars than justified by their operating exposures. We begin by documenting that, in a panel of 53 countries, central bank holdings of dollar reserves are significantly correlated with the dollar-denominated bank borrowing of their non-financial corporate sectors, controlling for a number of known covariates of reserve accumulation. We then build a model in which the central bank can deal with private-sector mismatch, and the associated risk of a domestic financial crisis, in two ways: (i) by imposing ex ante financial regulations such as bank capital requirements; or (ii) by building a stockpile of dollar reserves that allow it to serve as an ex post dollar lender of last resort. The model highlights a novel externality: individual central banks may tend to over-accumulate dollar reserves, relative to what a global planner would choose.! This is because individual central banks do not internalize that their hoarding of reserves exacerbates a global scarcity of dollar-denominated safe assets, which lowers dollar interest rates and encourages firms to increase the currency mismatch of their liabilities. Relative to the decentralized outcome, a global planner may prefer stricter financial regulation (e.g., higher bank capital requirements) and reduced holdings of dollar reserves.

"Systematizing Macroframework Forecasting: High-Dimensional Conditional Forecasting with Accounting Identities," with Sakai Ando [June 2022]

Abstract: Forecasting a macroframework, which consists of many macroeconomic variables and accounting identities, is widely conducted in the policy arena to present an economic narrative and check its consistency. Such forecasting, however, is challenging because forecasters should extend limited information to the entire macroframework in an internally consistent manner. This paper proposes a method to systematically forecast macroframework by integrating (1) conditional forecasting with machine-learning techniques and (2) forecast reconciliation of hierarchical time series. We apply our method to an advanced economy and a tourism-dependent economy using France and Seychelles and show that it can improve the WEO forecast.

"Safe Asset Demand, Global Capital Flows and Wealth Concentration" [October 2021]

Abstract: The US economy is often referred to as the “banker to the world,” due to its unique role in supplying global reserve assets and funding foreign risky investment. This paper develops a general equilibrium model to analyze and quantify the contribution of this role to rising wealth concentration among American households. I highlight the following points: 1) financial globalization raises wealth inequality in a financially-developed economy initially due to foreign capital pressing up domestic asset prices; 2) much of this increase is transitory and can be reversed as future expected returns on domestic assets fall; and 3) despite the low-interest-rate environment, newly accessed foreign capital provides incentives for affluent households to reallocate wealth toward risky assets while impoverished households increase their debt. Wealth concentration ensues only if this rebalancing effect is large enough to counteract diminished return on domestic assets. Quantitative analysis suggests that global financial integration alone can account for a third to a half of the observed increase in the current top one percent wealth share in the US, but indicates a possible reversal in the future.

"The Premia on State-Contingent Sovereign Debt Instruments," with Deniz Igan, Antoine Levy [November 2021]

Abstract: State-contingent debt instruments such as GDP-linked warrants have garnered attention as a potential tool to help debt-stressed economies smooth repayments over business cycles, yet very few studies of the empirical properties of these instruments exist. This paper develops a general framework to estimate the time-varying risk premium of a state-contingent sovereign debt instrument. Our estimation framework applied to GDP-linked warrants issued by Argentina, Greece, and Ukraine reveals three stylized facts: (i) the risk premium in state-contingent instruments is high and persistent; (ii) the risk premium exhibits a pro-cyclical pattern; and (iii) the liquidity premium is higher and more volatile than that for plain-vanilla government bonds issued by the same sovereign. We then present a model in which investors fear ambiguity and that can account for the cyclical properties of the risk premium.

"Multinationals as Global Financiers," with Casey Kearney [April 2020]

Abstract: U.S. multinational companies (MNCs) play a prominent role in raising capital abroad and investing in high-yield global business opportunities. Using administrative data collected by the U.S. Bureau of Economic Analysis on foreign funding and investment activities of U.S. multinational firms at the affiliate level, we estimate the impact of MNC operations on the persistent spread between the return on assets (ROA) and the interest rate payments of firms. Our evidence indicates MNCs enjoy a 0.9% larger spread between ROA and average interest rate compared to when these firms did not have large ownership holdings in foreign affiliates. We then introduce a model of MNC activity to disentangle potential mechanisms to explain the spread such as risk premium and cross-country return differentials. Our structural estimation of this model suggests some of the variations can be accounted for by the return differential channel due to the incomplete integration of global financial markets. Our results highlight the role of U.S. multinationals as global arbitrageurs in addition to being global risk-takers.