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       Department of Economics
       University of Arkansas, Fayetteville

Home  Curriculum Vitae Research  |  Contact  |  U of A Economics Faculty


The main focus of my research is in macro and open-economy macroeconomics. My Princeton advisors were Profs. Alan Blinder and Chris Sims.


Published Papers:

Supply Side Inflation Persistence. Joint with N. Zaniboni. [pdf]

Economics Letters – Volume 125, Issue 2, November 2014, Pages 191–194 (see the online article publication)

Abstract: We explore the role of the cost channel in accounting for inflation persistence in the New Keynesian model with Calvo pricing. Hump-shaped responses of inflation to monetary shocks are obtained under purely nominal rigidities.

Download the Online Supplementary Material with the extended description of the model and robustness analysis.


Globalization and Inflation: Evidence from a Time Varying VAR. Joint with F. Bianchi. [pdf]

Review of Economic Dynamics – Volume 18, Issue 2, April 2015, Pages 406-433 (see the online article publication)

Abstract: According to the Globalization Hypothesis, global economic slack should progressively replace the domestic output gap in driving inflation as globalization increases. We investigate the empirical evidence in favor of this prediction by using a Time-varying VAR. Two main results emerge from the analysis: First, global slack is found to affect the dynamics of inflation in many countries, yet its influence did not become stronger over time. Second, a panel analysis that exploits the cross-section characteristics of our dataset shows that globalization, measured in terms of trade and financial openness, is positively related to the effects of global slack on inflation. We conclude that integration in the global economy is in fact important, but globalization has not yet induced changes in openness large enough to justify significant brakes in inflation dynamics.

Download the Supplementary Material document referred to in the paper.

Download the Technical Note describing the dataset used in the paper and the corresponding Matlab codes.

Download the manuscript of Zaniboni (2008) in the references.


Excess Returns, Average Returns, and the Adjustment Mechanism of the External Position of a Country. [pdf]

Review of International Economics, Volume 24, Issue 2, May 2016, Pages 226-252 (see the online article publication)

Abstract: I provide a new decomposition of the external constraint of a country in which, in addition to trade and valuation channel, adjustments in the stochastic discount factor and the spread between average international returns and risk-free rate can offset a current debt position. The importance of these channels is empirically assessed using US data. A primary contribution of the discount factor and secondary effects of excess and average returns are found in the non-detrended analysis, confirming the theoretical characterization of the valuation effects in previous literature. By using detrended data instead, the role of excess returns would be spuriously overestimated.

Download the Online Supplementary Material with the additional results and the model simulation details.


State Dependent Price Setting Rules Under Implicit Thresholds: An Experiment. Joint with J. LeBlanc, C. Deck, and K. Bregu. [pdf]

Journal of Economics Dynamics and Control, Volume 68, July 2016, Pages 17-44 (see the online article publication)

Abstract: How firms make their pricing decisions is a fundamental question of macroeconomics. We use a laboratory experiment to examine individual choices in a price updating task that provide insight into how well state dependent models reflect behavior. We find that in general subjects behave as if they recognize the importance of a state dependent pricing strategy, but they are unable to ascertain this threshold with precision and they also exhibit a substantial degree of time dependence. As a result, they update prices too frequently, and perform statistically significantly fewer real effort profit-generating tasks than theoretically optimal under full state dependence, which results in statistically significantly lower profits as well.

Download the Online Supplementary Material with the full experimental details and additional results.


Globalization and Inflation: A Threshold Investigation. Joint with S. Ahmad. [pdf]

Journal of Macroeconomics, Volume 48, Issue June 2016, Pages 283--304 (see the online article publication)

Abstract: We use a threshold methodology to investigate the importance of non-linear effects in the analysis of the inflation globalization hypothesis. Accounting for potential non-linearities in the Phillips Curve, we show that trade openness is not rejected as a threshold variable for the effects of domestic and foreign slack on inflation in many advanced economies, and we find a switch of the output gap slopes from one regime to the other that is consistent with the key predictions of the inflation globalization hypothesis. For some countries the threshold Phillips Curve model also leads to improvements in out-of-sample forecast over the linear Phillips models, especially at longer horizons. Contrary to most of the previous literature which ignores such non-linearities, our new approach provides some interesting empirical evidence supportive of the effect globalization has on a country's inflation dynamics.



A Signal of Altruistic Motivation for Foreign Aid. Joint with A. Horowitz and A. Teixeira [pdf]

The B.E. Journal of Economic Analysis & Policy, Volume 16, Issue 4, October 2016 (see the online article publication)

Abstract: We develop a stylized theoretical model showing that countercyclical transfers from a wealthy donor to a poorer recipient generate a signal of altruistic donor motivation. Applying the model to OECD foreign aid (ODA) data we find the signal present in approximately one-sixth of a large set of donor-recipient pairs. We then undertake two out-of-model exercises to validate the signal: a logit regression of signal determinants and the growth effects of ODA from signal-positive pairs are compared to non-signal bearers. The logit indicates our signal meaningfully distinguishes donor-recipient pairs by characteristics typically associated with altruism. The growth exercise shows ODA from signal bearers displays stronger reverse causation and more positive long-run effects. Beyond foreign aid, our signal of altruistic motivation may be applicable to a wide range of voluntary transfers.


Papers Under Review:

Business loans and the transmission of monetary policy. Joint with S. Barraza and N. Zaniboni. [pdf]

Abstract: We study the transmission mechanism of monetary policy through business loans. We show that the puzzling increase of business loans following a monetary tightening is largely driven by drawdowns from existing commitments at large banks. However, contrary to the predictions of the bank lending channel, spot loans also take a considerable time to adjust to innovations. We then argue banks can reduce loan supply operating on dimensions other than just volumes and show that they indeed contract credit creation by shortening maturities of new loans in response to a tightening. Our paper illustrates the complexity of the transmission mechanism in relation to loans' contractual characteristics and borrower-lender types, with relevant implications for the conduct of monetary policy.


Foreign Aid and Growth: A P-VAR Analysis Using Satellite Sub-National Data for Uganda. Joint with A. Horowitz and A. Teixeira (supported by ARC grant). [pdf]

Abstract: We develop a measurement strategy for the impact of foreign aid based on a regional panel vector-autoregressive model (P-VAR). We illustrate the strategy using Ugandan districts. Data for the regional units (ADM2) is assembled combining satellite sources for socio-economic activity, geo-located aid disbursements, and traditional household surveys. We find statistically significant positive and persistent effects of aid shocks on nighttime luminosity. Mapping nightlights to economic activity, the results suggest that the economic magnitude of these effects is small, but significant -- with a multiplier between 2 and 3 in the medium to long-run. The P-VAR addresses endogeneity concerns associated with non-random aid assignment.


A Flexible and Customizable Method for Assessing Cognitive Abilities. Joint with C. Deck. [pdf]

Abstract: We develop a set of nonverbal problems in the spirit of the Raven's Progressive Matrices, for assessing subjects' cognitive abilities in laboratory experiments. We describe the characteristics of the puzzles and show how the degree of difficulty varies in these characteristics. We provide a calibration of the matrices in terms of response accuracy and response time as a function of these characteristics. Finally, we verify that our matrices effectively measure cognitive ability in a manner consistent with the Raven Progressive Matrices, both by directly comparing within-subject performance on the two types of problems and by replicating previous experimental results with our puzzles substituted for Raven's Progressive Matrices. Our approach is extremely flexible and highly customizable. For this reason our technique also provides a way to clearly and effortlessly modulate the difficulty of multiple tasks to the cognitive ability of the subjects.

Download the Interface to generate the Puzzles as a stand-alone executable file. It requires the pre-installation of MATLAB Compiler Runtime 64-bit (for MATLAB version 2016a).

Download the interface.m script and the supporting files for standard execution from the MATLAB console.


A Dynamic Panel Threshold Analysis of the Inflation Globalization Hypothesis. Joint with S. Ahmad. [pdf]

Abstract: Previous studies on the inflation globalization hypothesis have examined this question primarily at the individual-country level. However, a panel approach seems quite appropriate as globalization measures, such as trade openness, often exhibit considerable cross-sectional variation. We investigate the relationship between inflation and globalization, under an open-economy Phillips Curve framework, for a panel of OECD countries with the dynamic panel GMM methodology developed in Arellano and Bond (1991). Using this framework, we find strong evidence in favor of including global factors, represented by the foreign output gap, in a country’s inflation process. We further augment the dynamic panel model with a threshold component (Hansen, 1999), and so are able to identify regions of stronger responsiveness of inflation to global factors. Based on our non-linear analysis, we show that trade openness acts as a threshold variable for the effects of domestic and foreign slack on inflation. Importantly, the switch in the output gap slopes from one regime to the other is consistent with the key predictions of the inflation globalization hypothesis, so that in more open economies the foreign output gap replaces the domestic output gap as the key determinant in the country’s domestic inflation process.


Working Papers and Work in Progress:

International Real Business Cycles, Portfolio Diversification and Valuation Effects [pdf]

Abstract: This paper presents an international real business cycle model with endogenously determined portfolio allocations under incomplete markets. It jointly studies the properties of the portfolio side of the economy, which includes the valuation effects, asset returns and portfolio allocations, along with the more typical international macro variables. The model generates a substantial portfolio home bias because, for small values of the elasticity of substitution between domestic and foreign goods, home assets provide a good hedge against movements of international prices, which make home physical capital lose value in response to productivity shocks. The model generates also an adequate amount of assets' valuations, but does not resolve the Backus-Smith puzzle for standard parameterizations.


The Spatial Dimension of Urbanization in Indonesia. Joint with A. Gaduh. [pdf]

Abstract: We use the newly-released World Bank East Asia and Pacific Urban Expansion (WB-EAP UE) dataset to study the link between urbanization, economic, and social development in Indonesia. We implement two distinct approaches to study this link for the case of Indonesia. First, we combine the dataset with satellite data on luminosity to study the link between urbanization and aggregate, district-level, income. We explicitly embed into the analysis the spatial network structure of the districts and we find that the combined signals from urban expansion and luminosity significantly improve the estimates of regional economic growth relative to those exclusively based on luminosity. Second, we estimate a simple fixed-effects model using a panel dataset from the WB-EAP UE and the detailed village-level dataset to study how the expansion of built-up areas commensurate with those of socio-economic infrastructure, and whether urban expansions are associated with changes in the economic and social environment, and hence the quality of life in newly urbanized areas. We propose a strategy to select the control group for the newly urbanized villages based on spatial connectivity and clustering criteria. We find that the extent of infrastructural development, as well as socio-economic and environmental outcomes associated with urban expansion varies relative to the initial level of urbanization.

Rational Inattention and Consumer Choices: An Experiment. Joint with J. LeBlanc, C. Deck, and A. Tutino.

A New Approach to Disentangle Supply Responses to Monetary Shocks Using Call Reports Data. Joint with S. Barraza.

Effects of Globalization on Inflation: a Markov switching DSGE model estimation. Joint with F. Bianchi.

Training and the business cycle in a DSGE model. Joint with F. Mendez and F. Sepulveda.



Sam M. Walton College of Business  |  University of Arkansas 



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