María Pía Olivero

Dynamic gravity: endogenous country size and asset accumulation

Numerous gravity applications have resorted to panel data econometric techniques over the past decade. However, with the theory of gravity being so far only static, these estimations lack solid structural dynamic foundations. As a consequence, a consensus on a unified dynamic gravity estimation approach is yet to be reached. In this paper, (i) we build the theoretical foundations for a dynamic gravity model, (ii) we provide guidance for gravity‐type estimations with panel data and we consider applications, and (iii) we calibrate and simulate our model to compare its properties with those of the standard, static gravity setup. (De nombreuses applications du modele de gravite ont eu recours a des techniques econometriques de donnees de panel au cours de la derniere decennie. Cependant, la theorie de la gravite demeurant statique pour le moment, ces estimations manquent de fondements structurels dynamiques solides. En consequence, on n’a pas fait consensus sur une approche unifiee a l’estimation de modeles de gravite dynamique. Dans ce memoire, (i) on construit les fondements theoriques d’un modele de gravite dynamique; (ii) on suggere uen facon de proceder pour l’estimation de modeles de gravitea l’aide de donnees de panel, et on examine certaines applications; et (iii) on calibre notre modele et on le soumet a des simulations pour comparer ses proprietes avec celles obtenues au moyen du modele statique standard.)

Dynamic Gravity: Endogenous Country Size and Asset Accumulation (Gravité Dynamique: Le Cas Où La Taille Du Pays Et L’Accumulation D’Actifs Sont Endogènes)

Numerous gravity applications have resorted to panel data econometric techniques over the past decade. However, with the theory of gravity being so far only static, these estimations lack solid structural dynamic foundations. As a consequence, a consensus on a unified dynamic gravity estimation approach is yet to be reached. In this paper, (i) we build the theoretical foundations for a dynamic gravity model, (ii) we provide guidance for gravity‐type estimations with panel data and we consider applications, and (iii) we calibrate and simulate our model to compare its properties with those of the standard, static gravity setup. (De nombreuses applications du modele de gravite ont eu recours a des techniques econometriques de donnees de panel au cours de la derniere decennie. Cependant, la theorie de la gravite demeurant statique pour le moment, ces estimations manquent de fondements structurels dynamiques solides. En consequence, on n’a pas fait consensus sur une approche unifiee a l’estimation de modeles de gravite dynamique. Dans ce memoire, (i) on construit les fondements theoriques d’un modele de gravite dynamique; (ii) on suggere uen facon de proceder pour l’estimation de modeles de gravitea l’aide de donnees de panel, et on examine certaines applications; et (iii) on calibre notre modele et on le soumet a des simulations pour comparer ses proprietes avec celles obtenues au moyen du modele statique standard.)

DO BANK CAPITAL REQUIREMENTS AMPLIFY BUSINESS CYCLES? BRIDGING THE GAP BETWEEN THEORY AND EMPIRICS

In this paper we study the role of bank capital adequacy requirements in the transmission of aggregate productivity shocks. We identify a gap between the empirical and the theoretical work that studies the “credit crunch” effects of these requirements, and how they can work as a financial accelerator that amplifies business cycles. This gap arises because the empirical work faces some difficulties in identifying the effects of capital requirements, whereas the theory still lacks a structural framework that can address these difficulties. We bridge that gap by providing a general equilibrium theoretical framework that allows us to study this financial accelerator. The main insight we obtain is that the “credit crunch” and financial accelerator effects are rather weak, which confirms the findings of existing empirical work. Additionally, by developing a structural framework, we are able to provide an explanation for this result.

Twin Crises in Emerging Markets: The Role of Liability Dollarization and Imperfect Competition in Banking

Currency crises in emerging markets have been accompanied by banking crises, with concentration in the market for bank credit increasing after large devaluations. This paper examines how the presence of imperfect competition and liability dollarization in banking shapes the real effects of the just mentioned twin crises. An important gap in the theoretical literature is filled, by being the first paper to provide a model of twin crises in the presence of imperfect competition in banking, and the changes in market structure that occur in the aftermath of crises. Doing so, the analysis is able to reveal that currency devaluations generate more severe twin crises in economies with less competitive banking sectors. This result is consistent with the empirical evidence on the concentration‐fragility view, and it unveils the importance of prudential regulation that focuses on the market structure in banking.

Financial integration within Europe and the international transmission of business cycles among industrialized countries

We exploit a dataset on financial integration within Europe to answer a novel question in the international Real Business Cycle (RBC) literature. Does financial integration within Europe matter for the international transmission of business cycles between the United States and Europe? We find that it does, and that as European countries become more financially integrated among themselves, European business cycles start to ‘decouple’ from those in the United States. We show that this is true for three macro indicators of economic activity: Gross Domestic Product (GDP), consumption and investment, and for five alternative measures of the degree of financial integration. We also show that the effect of trade linkages becomes insignificant once financial factors are accounted for. Our work has interesting policy implications since it unveils the importance of further integration in the EU to slow down the transmission of aggregate shocks among industrialized nations.

MONETARY POLICY AND ANTI‐CYCLICAL BANK CAPITAL REGULATION

The financial crisis of 2008–2009 revived attention given to booms and busts in bank credit, and their effects on real activity. This interest sparked two different strands of research in macro. The first one focuses on monetary policy in the context of financial frictions. The second studies capital regulation in banking. To the best of our knowledge, so far these two topics have mostly been studied in isolation from each other. Thus, we still lack an understanding of how monetary policy and bank capital regulation interact in the presence of financial fragility. This paper aims to contribute to furthering this understanding. Specifically, we ask how the monetary policy rule should look like in the presence of cyclical capital requirements. We extend the dynamic stochastic general equilibrium model with bank capital in Aliaga‐Diaz and Olivero by introducing price rigidities in the spirit of the New‐Keynesian literature. We find that: First, anti‐cyclical requirements have important stabilization properties relative to the case of constant requirements. This is true for all types of fluctuations that we study, which include those caused by productivity, preference, fiscal, monetary, and financial shocks. Second, output and consumption volatilities present in the no regulation economy can be recovered with anti‐cyclical requirements as long as the policy rate responds only slightly to credit spreads. Third, monetary policy rules that respond to credit conditions also perform better in terms of welfare. (JEL E32, E44)