Research

Working Papers

The United States as the International Lender of Last Resort | Paper | Online Appendix | Submitted

abstract

This paper provides a stylized framework to study the role of the United States as the international lender of last resort to global banks. The model captures a central feature of the international financial system: non-US global banks invest heavily in US assets while remaining exposed to dollar liquidity shortages. This can generate multiple equilibria, including one that resembles a global financial crisis, with a sharp appreciation of the dollar, tighter financial conditions, weaker global activity, and distressed banks. The self-fulfilling nature of the crisis arises from a feedback loop between the exchange rate and banks' funding capacity. Because the liquidity needs of these banks are often denominated in dollars, the Federal Reserve is better equipped than other central banks to prevent the bad equilibrium when the dollar is strong. Yet its incentives to intervene through swap lines need not align with the rest of the world, because general equilibrium forces can draw cheaper capital flows into the United States during global stress.

Presented at: 2nd Sailing the Macro Workshop (Sep. 2022), Naples School of Economics PhD Workshop (Sep. 2022), BdF-BoE-BoI International-Macro Workshop (Nov. 2022), SAEe (Dec. 2022), CREi MacroLunch (May 2022/Mar. 2023), Universite Paris Nanterre PhD Conference (Apr. 2023), LBS TADC (May 2023), Journal of International Economics Summer School (Poster, Jun. 2023), XXVI Workshop on Dynamic Macro (Jul. 2023), EEA (Aug. 2023), LSE-Oxford Workshop on International Macroeconomics and Finance (May 2024), Theories and Methods in Macroeconomics (May 2025), Banque de France-EUI (Nov. 2025).

Countercyclical Capital and Reserve Requirements in a Small Open Economy | with A. Contreras | Paper

abstract

This paper studies the interaction between macroprudential instruments in a small open economy using a dynamic stochastic general equilibrium model with financial and nominal frictions. The framework features a tractable yet rich banking sector that highlights the distinct transmission channels of countercyclical capital and reserve requirements, especially through interest rate spreads and bank balance sheet composition. We examine optimal policy rules under different objectives for the monetary authority. Countercyclical adjustments to both instruments help smooth the credit cycle when financial stability is an explicit policy goal. Unlike capital requirements, however, tighter reserve requirements can raise inflation and have ambiguous effects on output, creating potential conflicts with traditional monetary policy goals. Under strict instrument-target separation, the optimal policy rule assigns reserve requirements to credit fluctuations and capital requirements to the output gap.

Presented at: EIEF (Mar. 2025), CEMLA LAJCB Conference (May. 2025), CEBRA (Aug. 2025).

Work in Progress

Monetary Policy and Capital Flows in a Global Banking World

Mapping financial integration: A two-dimensional taxonomy | with F. Palazzo

Monetary vs Financial Dominance: Institutional Incentives and Policy Misalignment | with A. Contreras

Policy Papers

The Implications of Loan Maturity on the Probability of Default: Evidence from Peruvian Loans | Paper

With V. Matienzo and A. Olivares. SBS Working Paper DT-003-2017.

Presented at: World Bank and ASBA (Jul. 2017), Annual Congress of the Peruvian Economic Association (2017), XXXV Central Reserve Bank of Peru Annual Research Conference (Oct. 2017).

Access to Financial Services through Retail Agents and Household Expenditures: Evidence from Peru | Paper

With C. Aparicio and K. Huayta. Journal of Financial Issues SBS Volume XII N1 2016.

Presented at: 2nd Conference on Banking Development, Stability, and Sustainability (Dec. 2016).

Pro-cyclicality and Non-linearities of the Credit Portfolio: evidence from Peru (1998-2015) | Paper

With C. Aparicio and V. Matienzo. SBS Working Paper DT-005-2016.

Discussions

Collateral Advantage: Exchange Rates, Capital Flows, and Global Cycles | Slides

By M. Devereux, C. Engel, and S. Wu. Salento Macro Meetings, 2025.

Is credit access still local for Italian firms? Evidence from a structural spatial-VAR model | Slides

By V. Di Giacinto, R. Felici, and M. Pagnini. Banca d’Italia, 2024.

Gone With The Wind: Monetary Policy and The Global Financial Cycle | Slides

By D. Murakami. London Business School TADC, 2023.

The Effects of Diagnostic Expectations in a Small Open Economy | Slides

By M. Montenegro. Universite Paris Nanterre, 2023.

Bank diversity and financial contagion

By E. Caiazzo and A. Zazzaro. Naples School of Economics, 2023.