The Dataverse Network is a great option for the distribution and long-term preservation of the data that underlies empirical studies. I like how it encourages the use of data citation standards and metadata to help describe the posted datasets. It also enables for replication studies to be readily undertaken on published work. It is a great resource for researchers. Currently, I have only one posted dataset, but I aim to increase my postings over time. Check it out!
Research Papers and Projects
- "Capital Flows are Fickle: Anytime, Anywhere," with Rupa Duttagupta, Jaime Guajardo, and Petia Topalova (IMF)
Abstract: Has the unprecedented financial globalization of recent years changed the behavior of capital flows across countries? Using a newly constructed database of gross and net capital flows since 1980 for a sample of nearly 150 countries, this paper finds that private capital flows are typically volatile for all countries, advanced or emerging, across all points in time. This holds true across most types of flows, including bank, portfolio debt, and equity flows. Advanced economies enjoy a greater substitutability between types of inflows, and complementarity between gross inflows and outflows, than do emerging markets, which reduces the volatility of their total net inflows despite higher volatility of the components. Capital flows also exhibit low persistence, across all economies and across most types of flows. Inflows tend to rise temporarily when global financing conditions are relatively easy. These findings suggest that fickle capital flows are an unavoidable fact of life to which policymakers across all countries need to continue to manage and adapt. (First Version, August 2013 / This Version, August 2013).
- "The Growth Comeback in Developing Economies: A New Hope or Back to the Future?" with Rupa Duttagupta, Jaime Guajardo, and Nkunde Mwase (IMF)
Abstract: Growth takeoffs in developing economies have rebounded in the past two decades. Although recent takeoffs have lasted longer than takeoffs before the 1990s, a key question is whether they could unravel like some did in the past. This paper finds that recent takeoffs are associated with stronger economic conditions, such as lower post-takeoff debt and inflation levels; more competitive real exchange rates; and better structural reforms and institutions. The chances of starting a takeoff in the 2000s was triple that before the 1990s, with domestic conditions accounting for most of the increase. The findings suggest that if today’s dynamic developing economies sustain their improved policies; they are more likely to stay on course compared to many of their predecessors. (First Version, May 2013 / This Version, May 2013).
- "Heterogeneous Bank Lending Responses to Monetary Policy: New Evidence from a Real-time Identiﬁcation," with Christopher Bowdler, Economics, University of Oxford, and Christoffer Koch, Economics, University of Oxford
Abstract: We present new evidence on how heterogeneity in banks interacts with monetary policy changes to impact bank lending. Using an exogenous policy measure identified from narratives on FOMC intentions and real-time economic forecasts, we find much greater heterogeneity in U.S. bank lending responses than that found in previous research based on realized federal funds rate changes. Our findings suggest that studies using realized monetary policy changes confound the monetary policy’s effects with those of changes in expected macrofundamentals. We also extend Romer and Romer (2004)’s identification scheme, and expand the time and balance sheet coverage of the U.S. banking sample. (First Version, September 2008 / This Version, May 2013).
- "Breaking through the Frontier: Can Today's Dynamic Low-Income Countries Make It?," with Rupa Duttagupta, Jaime Guajardo, Nkunde Mwase, Shan Chen, and Angela Espiritu (IMF). 2013. World Economic Outlook. April, chapter 4: 97-131.
Abstract: The frequency of growth takeoffs in low-income countries (LICs) has risen markedly during the past two decades, and these takeoffs have lasted longer than those that took place before the 1990s. Economic structure has not mattered much in sparking takeoffs—takeoff s have been achieved by LICs rich in resources and by those oriented toward manufacturing. A striking similarity between recent takeoffs and those before the 1990s is that they have been associated with higher investment and national saving rates and with stronger export growth, which sets them apart from LICs that were unable to take off and confirms the key role of capital accumulation and trade integration in development. However, recent takeoffs stand out from earlier takeoffs in two important aspects. First, today’s dynamic LICs have achieved strong growth without building macroeconomic imbalances—as reflected in declining inflation, more competitive exchange rates, and appreciably lower public and external debt accumulation. For resource-rich LICs, this has been due to a much greater reliance on foreign direct investment (FDI). For other LICs, strong growth was achieved despite lower investment levels than in the previous generation. Second, recent takeoffs are associated with a faster pace of implementing productivity-enhancing structural reforms and strengthening institutions. For example, these LICs have a lower regulatory burden, better infrastructure, higher education levels, and greater political stability. Looking forward, there remain many challenges to maintaining strong growth performance in today’s dynamic LICs, including the concentration of their growth in only a few sectors and the need to diversify their economies, and ensuring that growth leads to broad-based improvements in living standards. Still, if these countries succeed in preserving their improved policy foundation and maintaining their momentum in structural reform, they seem more likely to stay on course and avoid the reversals in economic fortunes that afflicted many dynamic LICs in the past. (Published Version, April 2013).
- "The Rising Resilience of Emerging Market and Developing Economies," with Abdul Abiad, Jaime Guajardo, and Petia Topalova (IMF)
Abstract: Economic performance in many emerging market and developing economies (EMDEs) improved substantially over the past twenty years. The past decade was particularly good—for the first time EMDEs spent more time in expansion and had smaller downturns than advanced economies. In this paper we document the history of EMDEs’ resilience over the past sixty years, and investigate what factors have been associated with it. We find that their improved performance in recent years is accounted for by both good policies and a lower incidence of external and domestic shocks—better policies account for about three-fifths of their improved resilience, while less frequent shocks account for the remainder. (First Version, December 2012 / This Version, December 2012).
- "Resilience in Emerging Market and Developing Economies: Will It Last?" with Abdul Abiad, Jaime Guajardo, and Petia Topalova (IMF). 2012. World Economic Outlook. October, chapter 4: 129-171.
Abstract: Many emerging market and developing economies have done well over the past decade and through the global financial crisis. Will this last? This chapter documents the marked improvement in these economies’ resilience over the past 20 years. These economies did so well during the past decade that for the first time, emerging market and developing economies spent more time in expansion and had smaller downturns than advanced economies. Their improved performance is explained by both good policies and a lower incidence of external and domestic shocks: better policies account for about three-fifths of their improved performance, and less-frequent shocks account for the rest. However, should the external environment worsen, these economies will likely end up “recoupling” with advanced economies. Homegrown shocks could also pull down growth. These economies will need to rebuild their buffers to ensure that they are able to respond to potential shocks on the horizon. (Published Version, October 2012).
- "Commodity Price Swings and Commodity Exporters," with Rupa Duttagupta, Andrea Pescatori, and Stephen Snudden (IMF). 2012. World Economic Outlook. April, chapter 4: 125-169.
Abstract: How do commodity price swings affect commodity exporters, and how should their policies respond? These questions have become relevant again with the confluence of a weak global economy and the sustained buoyancy of commodity markets following the slump of the 1980s and 1990s. This chapter reexamines the macroeconomic performance of commodity exporters during commodity price cycles. It highlights how performance moves with the price cycle. The economic effects on commodity exporters are strong when commodity prices are driven by the global economy. Countercyclical fiscal policies—which build buffers during commodity price upswings that can be used during downswings—can help insulate small commodity exporters that are exposed to economic volatility induced by commodity price fluctuations. However, when price increases endure permanently, higher public investment and lower labor and capital taxes can boost private sector productivity and welfare. Against the backdrop of near-record commodity prices, coupled with unusual uncertainty in the global outlook, the priority for commodity exporters is to upgrade their policy frameworks and institutions in addition to building fiscal buffers. However, if high price levels persist, a cautious approach—which maintains fiscal buffers while gradually incorporating new information to allow a smooth adjustment to potentially permanently higher prices—is a sensible way forward. (Published Version, April 2012).
- "Revisiting the Twin Deficits Hypothesis: The Effect of Fiscal Consolidation on the Current Account," with Daniel Leigh, IMF. 2011. IMF Economic Review. December, vol. 59, no. 4: 582-602.
Abstract: This paper investigates the effect of fiscal consolidation on the current account. We examine contemporaneous policy documents, including Budget Speeches, Budgets, and IMF and OECD reports, to identify changes in fiscal policy motivated primarily by the desire to reduce the budget deficit, and not by a response to the short-term economic outlook or the current account. Estimation results based on this measure of fiscal policy changes suggest that a 1 percent of GDP fiscal consolidation raises the current account balance-to-GDP ratio by about 0.6 percentage point, supporting the twin deficits hypothesis. This effect is substantially larger than that obtained using standard measures of the fiscal policy stance, such as the change in the cyclically adjusted primary balance. (First Version, December 2011 / Published Version, December 2011).
- " Separated at Birth? The Twin Budget and Trade Balances," with Abdul Abiad, Jaime Guajardo, Michael Kumhof, and Daniel Leigh (IMF). 2011. World Economic Outlook. September, chapter 4: 135-160.
Abstract: How do changes in taxes and government spending affect an economy’s external balance? Based on a historical analysis of documented fiscal policy changes and on model simulations, this chapter finds that the current account responds substantially to fiscal policy—a fiscal consolidation of 1 percent of GDP typically improves an economy’s current account balance by over a half percent of GDP. This comes about not only through lower imports due to a decline in domestic demand but also from a rise in exports due to a weakening currency. When the nominal exchange rate is fixed or the scope for monetary stimulus is limited, the current account adjusts by as much, but the adjustment is more painful: economic activity contracts more and the real exchange rate depreciates through domestic wage and price compression. When economies tighten fiscal policies simultaneously, what matters for the current account is how much an economy consolidates relative to others. Looking ahead, the differing magnitudes of fiscal adjustment plans across the world will help lower imbalances within the euro area and reduce emerging Asia’s external surpluses. The relative lack of permanent consolidation measures in the United States suggests that fiscal policy will contribute little to lessening the U.S. external deficit. (Published Version, September 2011).
- "International Capital Flows: Reliable or Fickle?," with Rupa Duttagupta, Jaime Guajardo, and Petia Topalova (IMF). 2011. World Economic Outlook. April, chapter 4: 125-163.
Abstract: This chapter analyzes international capital flows over the past 30 years to assess their predictability and their likely response to changes in the global macroeconomic environment. It finds that capital flows exhibit low persistence and that their volatility has increased over time. Across economies, net flows to emerging market economies are somewhat more volatile than those to advanced economies; across types of flow, debt-creating flows are somewhat more volatile and less persistent than others. Net capital flows to emerging market economies have been strongly correlated with changes in global financing conditions, rising sharply during periods with relatively low global interest rates and low risk aversion (or greater appetite for risk) and falling afterward. Furthermore, economies that have a direct foreign financial exposure to the United States experience an additional decline in their net capital flows in response to U.S. monetary tightening over and above what is experienced by economies that have no such direct U.S. financial exposure. This negative additional effect is larger when the U.S. rate hike is unanticipated and sharper for emerging market economies that are more integrated with global financial and foreign exchange markets, but smaller for economies with greater financial depth and relatively strong growth performance. Finally, the additional response to U.S. monetary tightening is deeper in an environment of low global interest rates and low risk aversion. These findings suggest that the eventual unwinding of globally accommodative financing conditions will, on the margin, dampen net flows to emerging market economies that have a direct financial exposure to the United States relative to those that do not, although strong growth performance in these economies can offset this negative additional effect. Thus, as economies further integrate with global financial markets, it is important to adopt policies to preserve domestic economic and financial strength to cope with variable capital flows. (Published Version, April 2011).
- "The Open Economy Consequences of U.S. Monetary Policy," with Christopher Bowdler, Economics, University of Oxford. 2011. Journal of International Money and Finance. March, vol. 30, no. 2: 309-336.
Abstract: We consider the open economy consequences of U.S. monetary policy, extending the identification approach of Romer and Romer  and adapting it for use with asset prices. Intended policy changes are orthogonalized against the economy’s expected future path, which captures any effects from open economy variables. Estimated from a set of bilateral VARs, the dynamic responses of the exchange rate, foreign interest rate, and foreign output are consistent with recent work that identifies U.S. policy via futures market changes and a priori impulse response bounds. We compare the two approaches, ﬁnding important commonalities. We also outline some advantages of our approach. (First Version, October 2005 / Published Version, September 2010).
- "The Long-Lived Effects of Historic Climate on the Wealth of Nations," with Akos Valentinyi, National Bank of Hungary, and Michael Vlassopoulos, Economics, University of Southampton
Abstract: We investigate the long-run consequences of historic climate (1730-2000) for the cross-country income distribution. Using a newly constructed dataset of temperature stretching over three centuries, we estimate a robust and significant time-varying, non-monotonic effect of temperature upon current incomes for a cross-section of 169 countries. We find a large, positive effect of 18th century temperature and an even larger, negative effect of 19th century temperature upon current incomes. When historic temperatures are introduced, the effect of current temperature on current income is insignificant. Our findings suggest that temperature's indirect effect upon income through historical channels dominates any direct contemporaneous effect. We provide evidence on one possible channel by which historic temperature affects current income that focuses on the interaction between agricultural productivity, international trade, and industrialization. (First Version, November 2009 -- CEPR Discussion Paper No. 7572, MPRA Paper No. 18701, SSRN No. 1508063 / This Version, June 2010).
- "The Empirics of International Monetary Transmission: Identification and the Impossible Trinity," with Christopher Bowdler, Economics, University of Oxford. 2010. Journal of Money, Credit, and Banking. June, vol. 42, no. 4: 679-713.
Abstract: The transmission of monetary policy across borders is central to many open economy models. Research has tried to evaluate the “impossible trinity” through estimating international interest rate linkages under alternative exchange rate regimes using realized base country interest rates. Such interest rates include anticipated and endogenous elements, which need not propagate internationally. We compare international interest rate responses under pegged and non-pegged regimes to identiﬁed, unanticipated and exogenous U.S. interest rate changes and realized U.S. interest rate changes. We ﬁnd important differences in estimated transmission from the two sets of measures – identiﬁed interest rate changes demonstrate a greater concordance with the impossible trinity than realized rate changes. (First Version, October 2006 / Published Version, October 2009).
- "Hurricanes: Intertemporal Trade and Capital Shocks" (Nuffield College Economics Paper 2005-W22)
Abstract: Hurricanes in the Caribbean and Central America represent a natural experiment to test the intertemporal approach to current account determination. The intertemporal approach allows for the possibility of intertemporal trade, via international borrowing. Previous tests of intertemporal current account (ICA) models have typically relied upon the identification of shocks in a VAR framework with which to trace the current account response. Hurricane shocks represent exactly the kind of temporary, country-specific shock required by the theory, allowing for the intertemporal current account response to be estimated without recourse to a VAR shock decomposition. Using data on the economic damages attributable to a hurricane, I estimate the economy`s response to a hurricane-induced capital shock within a fixed effects panel model. The current account response qualitatively conforms to the S-shaped response predicted by the theory, indicating that countries are engaging in intertemporal trade. However, the exact timing and magnitude of the response differs from a standard ICA model`s smooth behavior. A hurricane which destroys capital valued at one year`s GDP pushes the current account over GDP into deficit by 5 percentage points initially. 3-8 years after such a hurricane, the current account over GDP moves into surplus at 2.7 percentage points. (First Version, November 2002 / This Version, May 2005).
- "Education and Intergenerational Mobility: Evidence from a Natural Experiment in Puerto Rico", with Elizabeth U. Cascio, Economics, Dartmouth College (Nuffield College Economics paper 2005-W21)
Abstract: The existence of intergenerational spillovers to public investments in schooling is often assumed in policy discussions regarding economic development. However, few studies to date have forwarded convincing evidence that externalities exist for developing countries. In this paper, we address this issue using the arguably exogenous schooling consequences of a major hurricane strike on Puerto Rico in the 1950s. Using data from the U.S. Census of Population for Puerto Rico, we first find that individuals on the margin of school entry at the time of the storm and residing in the most exposed regions of the island had significantly lower levels of education as adults than their counterparts in less exposed regions. Using the interaction of wind speed and age at the time of the storm as an instrument, we then find that maternal education is related to the probability that a child speaks English. Our estimates imply an additional year of education raises the probability that a child speaks English by between 4.3 and 4.5 percentage points, or approximately 24 to 28 percent. We find no conclusive evidence that parental education increases the probability that a child is enrolled, literate, or in an age-appropriate grade. On balance, these findings suggest that education is responsible at least in part for the persistence of human capital across generations. (First Version, August 2003 / This Version, April 2005).
- "Can democracy help? Growth and ethnic divisions." 2001. Economics Letters. January, vol. 70, no. 1: 121-126.
Abstract: This paper presents further empirical evidence suggestive of democracy’s positive role in ameliorating the negative growth effects of ethnic diversity in nations. However, it is shown that endogeneity problems and a direct negative growth effect of democracy place inherent limitations on the strength of policy implications which may be drawn from the evidence.