Research projects 2021

1.    «Impact of the interbank market panic on payments of firms»

Disruptions to the payment system cause money to become illiquid. We show both theoretically and empirically that money illiquidity severely impairs economic activity through two channels: firms' direct loss of payment access and a payment network externality that amplifies the initial shock. We develop an equilibrium model in which payment shocks disrupt firms' access to bank-intermediated payment services and propagate upstream through firms' input-output network. Firms' resilience to payment disruptions is captured by the elasticity of the firm's eigenvector centrality to the payment shock.

2.    «Financial stability and macroprudential policy»

We study the effect of macroprudential policy in dampening the effect of shocks to an economy estimated to Chilean data. The model includes a heterogeneous production and banking sector, and financial frictions (collateralized borrowing and unsecured loans with endogenous default). We show that the heterogenous effect of shocks on large and small banks implies that Countercyclical capital buffers should be introduced together with countercyclical Liquidity coverage ratios. This is because the countercyclical LCR combined with the CCyB makes it costly for banks to expand their balance sheets and so helps to dampen fluctuations in leverage over the business cycle.

3.    «Asymmetry of information between bond funds»

Using the unexpected outcome of Argentinian presidential primary elections in August 2019, which led to the country's sovereign default, we investigate how the exposure of international bond funds to Argentinian sovereign bonds affected the discretionary sales of bonds by fund managers and flows by ultimate investors, conditional on fund liquidity and maturity structure. We find that more liquid and longer duration funds exhibit less sensitivity to pre-default funds' exposure in terms of bond holding growth.