Click on the bullets to see the abstracts. Here is my Google Scholar profile.
Intraday data solves the exchange rate puzzle in emerging markets.Abstract: This paper argues that the null or weak response of emerging market currencies to domestic monetary policy documented in the literature is the result of wide event windows. An event study with intraday data for Mexico shows that an unanticipated tightening appreciates the currency and flattens the yield curve, consistent with the evidence for advanced economies. With daily event windows, however, only the yield curve responds to monetary policy. Noise in daily exchange rate returns explains the lack of response of the currency. Such noise gives rise to a bias that declines after controlling for potential omitted variables.
“Do Central Bank Words Matter in Emerging Markets? Evidence from Mexico,” Journal of Macroeconomics, forthcoming. (Paper)
Guidance about future policy is not exclusive to central banks in advanced economies.Abstract: This paper analyzes the price and quantity effects of monetary policy statements in an emerging market economy. Surprises in monetary policy are identified using intraday data on asset prices around monetary policy announcements in Mexico. I find that asset prices and the portfolio flows of domestic and foreign investors respond strongly and persistently to both news about the policy rate and guidance about its future path communicated via statements. The ability to manage expectations about future policy via statements is thus not exclusive to central banks in advanced economies and does not require the zero lower bound to be binding.
“The Impact of Macroeconomic News from Mexico and the U.S. on the Mexican Stock Market” with Rodolfo Cermeño Bazán, Economía Mexicana (renamed Latin American Economic Review in 2014), 2012, 35-67. [In Spanish] (Paper)
Stock returns in Mexico are associated with macroeconomic surprises from Mexico and the U.S.Abstract: This paper studies the relationship between the arrival of macroeconomic news and the Mexican stock market. We use GARCH models to examine the reaction of daily excess returns of stock prices to surprises in Mexican and U.S. macroeconomic releases from 2003 to 2008. We find that the dynamics of daily returns in the Mexican stock market are linked to the arrival of new information on macroeconomic fundamentals from both Mexico and the U.S.
U.S. monetary policies lead to a reassessment of policy rate expectations and risks in emerging markets.Abstract: This paper studies how U.S. monetary policy transmits to the sovereign yields of emerging markets without ignoring credit risk. First, investors expect emerging market central banks to follow the monetary stance of the Fed. Second, U.S. unconventional monetary policies influence the term premium in emerging markets as in the U.S. Third, U.S. monetary policy also alters the pricing of sovereign credit risk in emerging markets, a previously overlooked channel. To quantify these effects, I first identify target, forward guidance and asset purchase surprises in the U.S. using intraday data, and then propose a novel (three-part) decomposition of emerging market yields that accounts for credit risk.
Banks use different strategies to insulate their return on assets from monetary policy shocks.Abstract: Using bank-level data from Mexico, this paper shows that banks insulate their return on assets (ROA) from monetary policy changes using different strategies. The ROA components of some banks are insensitive to changes in monetary policy, especially their net interest margin (NIM) since they match their interest income and expenses. Meanwhile, other banks offset changes in their NIM with other ROA components. The strategy implemented depends on the charter (domestic or foreign) and business model. For example, the largest banks do not match their interest income and expenses. Subsidiaries of foreign banks, however, are closer to matching than domestic banks.
“Stock Returns and the Drivers of Portfolio Equity Flows in Emerging Markets,” 2019. (Paper)
Stock market returns help to identify global and domestic factors in portfolio equity flows.Abstract: This paper uses stock market returns to identify common (global) and idiosyncratic (domestic) factors in the portfolio equity inflows of emerging markets. The analysis covers 16 emerging markets from 1999 to 2015. A portfolio allocation model guides the identification strategy in vector autoregression models. The evidence is consistent with the predictions of the model. I find that global shocks mainly drive portfolio equity inflows, whereas global and domestic shocks drive stock market returns.
The Mexican interbank market has a core-periphery structure.Abstract: This paper provides evidence that the Mexican interbank market is tiered. I fit the core-periphery model developed by Craig and von Peter (2010) to 157 daily networks (from January 3 to August 15, 2011) of bilateral exposures (aggregated and disaggregated) between 41 commercial banks and 6 development banks. The main findings are (i) the core-periphery model provides a better fit to the Mexican interbank market than random networks, that is there are money center banks that intermediate with the rest of the banks in the market, (ii) the size and the composition of this group of banks is remarkably stable over time for aggregated (and some disaggregated) networks, (iii) the relations (borrowing and lending) between banks in the core and the periphery are asymmetric. The results are robust and significant.
“The Asymmetric Credit Channel of Monetary Policy” by Ander Pérez-Orive, Yannick Timmer and Alejandro van der Ghote, 2023. (Slides)
“Firm’s Internal Dynamics and Credit Risk in Emerging Asia” by Arti Omar and P. Krishna Prasanna, 2021. (Slides)
“Bond Flows and Liquidity: Do Foreigners Matter?” by Jens H. E. Christensen, Eric Fischer and Patrick J. Shultz, 2020. (Slides)