Abstract: In this paper we document empirical evidence regarding the unintended consequences of financial regulatory changes on market liquidity of Mexican sovereign debt. We find mixed impacts: in the context of Basel 2.5, Basel III and the Liquidity Coverage Ratio, we find negative effects, while in the case of the Dodd-Frank Act and the Volcker Rule we find positive effects. The difference in results can be explained by the fact that some of the regulatory changes mainly imposed additional constraints on government debt holdings, while others were designed to enhance transparency and thus reduce uncertainty as well as information asymmetries. Moreover, our estimates suggest that the aggregate effect of the regulatory changes decreased the weekly turnover ratio of Mexican sovereign debt securities by 18 percent. Our results hold under different liquidity measures and different econometric specifications.

[Paper]

Abstract: Coercive pressure from a large economy can reprice a smaller sovereign's default risk well before any shock to its fundamentals. I study this channel using the pressure that Donald Trump directed at Mexico during his 2016 campaign and first year in office, a setting that isolates the geoeconomic shock from Mexico's own fiscal position. Using a synthetic-control estimator on daily credit default swap data, I find that this pressure raised Mexico's sovereign spread by 24 basis points on average, and a textual analysis of Trump's social-media posts shows that trade threats, not migration threats, drove the rise. I then trace how this Mexico-specific repricing transmits to asset prices: a one-basis-point increase in the spread depreciates the peso by 5.3 cents and lowers Mexican equity returns by 0.11 percent, with financial and tradable-goods sectors most exposed. A quantitative sovereign-default model, in which the pressure tilts the income process toward adverse states, rationalizes the repricing as the price of a tail risk that never materialized and implies a welfare cost of 0.09 percent of consumption. As complementary, data-driven evidence, high-frequency and filtering methods put the consumption cost at 0.35 percent.

Presentations: Midwest Macroeconomics Conference at Texas Tech (2023), UMN-UWM Workshop (2024), JIE Summer School at Oxford (2024), 18th FIW Research Conference `International Economics' at WU Vienna (2026), UMN-UWM Workshop (2026), Econometric Society NASM at Emory University (2026), AEA's Poster Session (2027, scheduled).

Awards: Juli Plant Grainger Institute Summer Fellowship (2023)

[Draft - coming soon!] [Slides - coming soon!] [Podcast - coming soon!]

Abstract: This paper studies how trade concentration amplifies the effect of global trade policy uncertainty on sovereign credit risk. When exports are concentrated in a few destinations, higher uncertainty increases the likelihood of adverse export revenue realizations that can trigger sovereign default. We formalize this mechanism in a small open economy model with sovereign borrowing and default, where trade concentration raises income volatility, and higher volatility increases default risk. Our main result shows that trade concentration magnifies the impact of uncertainty: the same increase in trade policy uncertainty leads to a larger rise in default risk and sovereign spreads in more concentrated economies. Consistent with the model, cross-country panel evidence indicates that trade policy uncertainty generates significantly larger increases in sovereign CDS spreads in countries with more concentrated export structures, and panel local projections show that this amplification is dynamic and persistent.

[Draft - coming soon!]

Abstract: This paper uses firm-level data to test the so-called markup channel of uncertainty shocks. To that end, we measure markups based on a production function approach using quarterly data from US Compustat. We identify uncertainty shocks from macroeconomic data using a Bayesian VAR with Stochastic Volatility. Contrary to the predictions of DSGE models with nominal price rigidities, we find that markups are procyclical to uncertainty disturbances. Specifically, a one-standard-deviation shock to uncertainty decreases markups by approximately 0.30 percentage points. The effect is long-lived, lasting up to three years for most uncertainty measures. We find that the conditional procyclicality of uncertainty is robust to several sensitivity checks. Our results are consistent with previous findings in the literature that rely on aggregate measures of markups and alternative identification strategies of shocks to uncertainty.

Presentations: ITAM Alumni Conference (2024), Midwest Macroeconomics Conference at Kansas City Fed (2025)

[Draft][Slides]

Abstract: We study the effects of domestic non-deliverable forwards (DNDF) on the level and volatility of the USD/MXN nominal exchange rate. We focus on the introduction of this policy tool by the Central Bank of Mexico in 2017 and find that the announcements of this policy were successful in mitigating both depreciation pressures and volatility of the Mexican peso. We estimate an appreciation of the peso of approximately 33 cents after the first announcement of the policy and a reduction in the option-implied exchange rate volatilities for different maturities of 40 cents on average. We also document that the effect on option-implied volatilities is larger the shorter the maturity of the exchange rate options. Contrary to the announcement effect, we do not find an impact associated with the implementation of this instrument. We rationalize our findings using a model of a small open economy with collateral constraints and show that this policy tool can be used to prevent a self-fulfilling currency crisis or to mitigate the severity of the contraction should the crisis materialize.

Presentations:  UMN-UWM Workshop (2024), Midwest Economics Association (2025), Midwest Macroeconomics Conference at Kansas City Fed (2025), 20th Annual Economics Graduate Student Conference in St. Louis (2025), 6th Biennial Conference in Financial Stability at Banco de México (2025)

Awards: Juli Plant Grainger Institute Summer Fellowship (2024)

[Draft] [Slides]

Abstract: Financial uncertainty generates pernicious effects over economic activity such as investment delay and capital outflows (i.e., flight-to-quality effect), thus it is important to measure it and to design strategies that might mitigate it. Based on recent work, we construct a daily financial uncertainty measure for the Mexican financial markets. Our two-step approach consists of extracting a common factor from 5 financial time series that account for global, currency, sovereign, equity, and corporate risk, afterwards we use an EGARCH model, which accounts for the asymmetric response to news of the financial variables, to extract the conditional variance of the residuals and average them to obtain our measure of financial uncertainty. The uncertainty measure captures relevant local and global events related to elections, crises, and major government decisions. We assess the impact of financial uncertainty on economic activity, the correlation between our measure and other indicators of uncertainty, the relationship between financial conditions and financial uncertainty, and the effect of uncertainty on holdings of government debt by foreign lenders.

[Draft]

Abstract: We produce a measure of the pre-COVID economic effect of the 2018 presidential election outcome in Mexico and the subsequent economic changes that the economy experienced. We use the Synthetic Control methodology to estimate a counterfactual for Mexico's GDP per capita in 2010 United States dollars. The result indicates a reduction of $332.00 US dollars by the fourth quarter of 2019. A placebo test indicates that the result is statistically significant at a level of 7.14%. The comparison between counterfactual and observed income shows that GDP had a positive trend until the second quarter of 2018. Starting in the third quarter of 2018, the Mexican economy fell below that trend and displayed a different path with a negative slope. Our results are robust to alternative specifications. Additionally, we show that, at least for the previous presidential term that started in 2012, there was no first-year-of-government effect that was discussed by economists in the media to explain the contraction in 2019. We also find that there was no immediate negative impact on the Mexican economy of the election of Donald J. Trump as president of the United States in 2016, considering that he had an anti-NAFTA rethoric in campaign.

[Draft]

Abstract: Mexico grew -0.1% in 2019. That rate is well below the average between 1980 and 2018, which is 2.4%. Our hypothesis is that the Mexican economy suffered a pre-COVID fall in its trend growth. To validate the hypothesis we proceed as follows: i) analyze the dynamics of some macroeconomic variables in the first year of the current (2018-2024) and the three previous presidential terms; ii) measure the change in the trend in economic activity and estimate the probability of the economy being in a low growth regime (in a statistical sense) using a three-state Markov switching model; iii) estimate a multivariate regime Markov switching model with the growth of five variables. We summarize our findings into two main results: i) there is a common pattern in macro variables in the first year of a new administration. The main distinguishing feature of the current administration is the reversal of the trade balance in 2019; ii) Mexico moved towards a low growth regime at the end of 2018. We propose, without establishing causality, that the source of the fall in trend growth comes from large changes in economic policy in 2018 and 2019. These changes translated into a negative shock to trend growth. We list four alternative hypotheses. We propose a test for theories explaining the change in 2019: to explain simultaneously the fall in growth and the change of sign of the trade balance. Our theory could account for both facts.

[Draft]

Abstract: Sovereign credit ratings significantly influence economic decisions and activity, making their monitoring crucial. We propose an application of Fisher’s (1936) permutation test to assess the likelihood of Mexico belonging to specific credit rating categories at different time periods. By analyzing the dynamics of 5-year credit default swaps across 68 advanced and emerging market economies, we find evidence suggesting that Mexico’s CDS exhibits a dynamic similar to those associated with speculative grade ratings. To enhance the robustness of our findings, we conducted tests using credit ratings from other reputable agencies like Fitch and Moody’s. The results consistently indicate that Mexico’s CDS has exhibited a dynamic comparable to those economies with speculative grade ratings.

[Slides]