Current Research
Imperfect Exchange Rate Pass through: Empirical Evidence and Monetary Policy Implications (Job Market Paper)
This paper studies the conduct of monetary policy in an open economy setting using optimized Taylor-type rules. To that end, we construct a small open economy (SOE) model interacting with the rest of the world (ROW) nesting two different pricing paradigms: local currency pricing (LCP), equivalent to dominant currency pricing in our two-country setup, alongside producer currency pricing (PCP). Moreover, we incorporate traded intermediate inputs and investment goods, incomplete international asset markets and, in order to capture distributional effects of policy, a TANK framework with a proportion of ‘rule of thumb’ consumers without access to assets markets. The main results are: first, using US and Canadian data, we find that LCP easily beats PCP in a likelihood race; second, for the closed economy ROW the price-level rule closely mimics the optimized general inflation-output rule, whereas for the SOE the corresponding result requires a nominal income rule.
Monetary Growth Rules in an Emerging Open Economy [Revise & Resubmit]
We develop a small open economy model interacting with a rest-of-the-world bloc, contain- ing relevant emerging economies’ features: incomplete exchange rate pass-through, limited asset markets participation (LAMP), as well as an informal sector. We show that monetary growth rules are stable regardless of the level of asset market participation, i.e., they avoid the inversion of the Taylor principle, unlike standard interest rate rules. Estimation results using data for Mexico reveal that shocks are amplified by the presence of LAMP, while the informal sector acts as buffer, lowering the variability of aggregate and formal fluctuations.
Optimal Liquidity Provision and Interest Rate Rules: A Tale of two Frictions
We study central bank liquidity provisions to the banking sector in a DSGE model esti- mated for the Euro Area with financial frictions on the supply and demand side of credit. We show that liquidity provisions, as in the ECB’s recent Long Term Refinancing Operations, can be welfare-enhancing or welfare-reducing when both these financial frictions exist. They relax the banks’ leverage constraint and induce banks to provide more credit. This reduces the credit spread facing firms and increases investment, but this comes at the cost of implementing the liquidity policy. We compute a welfare optimized liquidity rule for the central bank responding to output, inflation and the interest rate spread that can increase welfare in comparison with the case of no liquidity provision. Crucially, this result is conditional on a high level of central bank monitoring of the its loanable funds to banks.
Publications
''The impact of exchange rate volatility on foreign direct investment in Iran'' with Hosein Sharifi - Procedia Economics and Finance - Vol. 1, pages 365-373, July 2012.
''Analysis the Impact of Good Governance on the Non-Oil Export of Oil Exporting Countries'' with Hosein Sharifi, Hassan Mollaesmaeili - Journal of Economic Policy and Research - Vol. 8(1), pages 1-14, March 2013.
''Money Growth Rules in an Emerging Small Open Economy with an informal sector'' with Zahra Nasrollahi, Paul Levine, Vasco Gabriel - International Journal of Business and Development Studies, Vol. 11, No. 1, (2019) pp 5-42.
Handbook Chapter in “Empirical Macroeconomics” with Leilane Cambara, Paul Levine, Vasco Gabriel - new edition of "Handbook of Research Methods and Applications in Empirical Macroeconomics" published by Edward Edgar 2013, forthcoming 2025.
Working Papers
''Imperfect Exchange Rate Pass through: Empirical Evidence and Monetary Policy Implications'' with Paul Levine, Vasco Gabriel (UVIC).
''Monetary Growth Rules in an Emerging Open Economy'' with Paul Levine, Vasco Gabriel (UVIC). (Revise & Resubmitted)
''Optimal Liquidity Provision and Interest Rate Rules: A Tale of Two Frictions'' with Paul Levine, Joseph Pearlman (CUL), Stylianos Tsiaras (UNIL).
Works in Progress
''Imperfect Exchange Rate Pass through: A Tale of Two Countries'' with Paul Levine, Vasco Gabriel (UVIC).
"Monetary Policy Implications of Dominant, vs Local vs Producer Currency Pricing"
''Optimal Monetary and Forex Intervention Rules in a open economy framework'' with Leilane Cambara, Paul Levine, Vasco Gabriel (UVIC).