[ Publications ]


Immigration, Remittances and Business Cycles” (with Federico Mandelman)


Journal of Monetary Economics, vol. 59(2), March 2012.  [Appendix]


Using data on border enforcement and macroeconomic indicators from the U.S. and Mexico, we estimate a two-country business cycle model of labor migration and remittances. The model matches the cyclical dynamics of unskilled migration, and documents the insurance role of remittances in consumption smoothing. Over the cycle, immigration increases with the expected stream of future wage gains, but it is dampened by a sunk emigration cost. Migration barriers slow the adjustment of the stock of immigrant labor, enhancing the volatility of unskilled wages and remittances. Changes in border enforcement have asymmetric welfare implications for the skilled and unskilled households.


Financial Frictions, Trade Credit, and the 2008-09 Global Financial Crisis(with Brahima Coulibaly and Horacio Sapriza)


International Review of Economics & Finance, vol. 26, April 2013.


This paper studies the role of the credit crunch in the severe contraction of economic activity during the 2008-09 global financial crisis, using firm-level data from six emerging Asian economies. After controlling for the effect of falling demand, we find that sales declined by less for firms with better pre-crisis financial conditions. Amid the decline in external financing opportunities, some firms relied more on trade credit from suppliers during the crisis, which allowed them to post relatively better sales. Export-intensive firms resorted less to trade credit as an alternative source of finance, which contributed to their larger declines in sales.


[ Working Papers ]


Liquidity Shocks, Dollar Funding Costs, and the Bank Lending Channel during the European Sovereign Crisis” (with Ricardo Correa and Horacio Sapriza), International Finance Discussion Paper 1059, Federal Reserve Board, November 2012.


This paper documents a new type of cross-border bank lending channel. The deepening of the European sovereign debt crisis in 2011 restrained the financial intermediation of European banks in the United States. In this period, some of the U.S. branches of European banks faced a dollar liquidity shock—due to their perceived risk reflecting the sovereign risk of their countries of origin—which in turn affected the branches’ lending to U.S. entities. We use a novel dataset to analyze the operations of branches of foreign banks in the United States. Our results show that: (1) The U.S. branches of European banks experienced a run on their deposits, mainly from U.S. money market funds. (2) The branches with curtailed access to large time deposits relied more on funding from their own parent institutions, thus shifting from being net suppliers to being net receivers of dollar funding from their related offices. (3) Since the additional funding received from parent institutions was not enough to offset the decreased access to U.S. funding, such branches reduced their lending to U.S. entities.


Offshore Production and Business Cycle Dynamics with Heterogeneous Firms,” International Finance Discussion Paper 995, Federal Reserve Board, updated December 2012.


Cross-country variation in production costs encourages firms to relocate production facilities to other countries, a process known as offshoring through vertical foreign direct investment. To examine the effect of offshoring on the international transmission of business cycles, I propose a model that distinguishes between fluctuations in the number of offshoring firms (the extensive margin) and in the value added per offshoring firm (the intensive margin) as separate transmission mechanisms. In the model, firms are heterogeneous in labor productivity. They face a sunk cost to enter the domestic market, and an additional fixed cost to produce offshore. The offshoring decision depends on the firm-specific level of labor productivity and on fluctuations in the relative cost of effective labor. They key results are: (1) The model replicates the pro-cyclical pattern of offshoring, as well as the dynamics along its extensive and intensive margins, which I document using data from U.S. manufacturing and Mexico's maquiladora sector. (2) Offshoring enhances the co-movement of output between the countries involved, in line with existing empirical evidence. (3) Offshoring reduces the price dispersion across countries, as it dampens the real exchange rate appreciation generated by aggregate productivity differentials.


[ Other Publications ] 


Real Convergence in Central, Eastern and South-Eastern Europe” (with Magdalena Morgese Borys and Eva Katalin Polgar)


Chapter in volume, “Real Convergence in Central, Eastern and South-Eastern Europe,” Reiner Martin and Adalbert Winkler (co-editors), Palgrave-Macmillan Press, February 2009.


Real Convergence and the Determinants of Growth in EU Candidate and Potential Candidate Countries: A Panel Data Approach” (with Magdalena Morgese Borys and Eva Katalin Polgar)


Occasional Paper No. 86, European Central Bank, June 2008 (refereed series).


We show that that total factor productivity growth, followed by capital accumulation, have been the main drivers of convergence for the EU candidate and potential candidate countries with the euro area. In contrast, labour has had a marginal contribution to economic growth. We also provide evidence of conditional convergence in the transition countries of central, eastern and south-eastern Europe. More specifically, controlling for the quality of institutions, the extent of market reforms and macroeconomic policies, we find a significant and negative link between the initial level of GDP and subsequent growth. In order to enhance their real convergence with the euro area, the candidate countries need to address the current labor market mismatches through improved labour utilisation and investment in human capital.


Explorations into the Production of State Government Services: Education, Welfare, Hospitals” (with Richard W. Tresch)


Working Paper No. 679, Economics Department, Boston College, November 2007.


This paper explores the production characteristics of three important U.S. state government services--public higher education, public welfare, and state psychiatric hospitals—during the last half of the twentieth century. We estimate translog cost functions for the three services and find that their production attributes are similar in a number of respects. First, production exhibits substantial economies of scale; unexploited scale economies are so severe that the average state operates on the negative portion of its marginal cost curve. Second, the analysis of technical change indicates that public education, welfare, and hospitals are affected by severe technical regression in all states, in both the long run and short run. Third, production of all three services is overcapitalized in most states; the provision of these services is not long-run efficient. Finally, we show that the Baumol-Oates cost disease of lagging productivity growth is rampant in all three services; only the short-run productivity growth in education matches the performance of the private sector, as technical regression is more than offset by the productivity-enhancing scale effect of increased enrollments.


Antidumping: Prospects for Discipline from the Doha Negotiations” (with J. Michael Finger)


Journal of World Investment & Trade, 6(4), August 2005, pages 531-548.


Also available as Working Paper No. 632, Economics Department, Boston College, November 2005.