UCLA

This dissertation contains three essays on monetary and international economics. In the first chapter, I study massive drops in household consumption during large devaluations associated with sudden stops. Using cross-country comparison and the Mexican 1994-peso crisis as a case study provides evidence that, unexpectedly, non-tradable consumption decreases as much as tradable. Then, employing micro-data, I show that the previous result is motivated by high-income households who concentrate their expenditure on non-tradable. Moreover, expenditure share in non-tradable increases with income level, reflecting non-homotheticities. Based on this evidence, I build a new open economy framework that combines a Heterogeneous Agent New Keynesian structure and non-homothetic CES preferences and allows for reconciling micro and macro evidence of the Mexican 1994-peso crisis. Moreover, a novel result emerges: The propagation of disturbances across economic sectors through household consumption decisions is asymmetric, depressing production more when it starts in the tradable sector.

In the second chapter (with Bernardo Candia and Youyou Xu), we use detailed microdata from Chile to analyze the role of currency invoicing for exchange rate pass-through (ERPT) at the border and the store at different time horizons. At the border, we find a predominant role for the USD for ERPT; however, bilateral exchange rates matter for longer time horizons. For imports, the bilateral ERPT is higher for consumption goods, while for exports, it is higher for non-consumption goods. Next, at the store, we show that exchange rate fluctuations do not affect retail prices on impact, consistent with sticky prices set in the consumer's currency. For longer time horizons, as nominal rigidities ease, bilateral and USD exchange rates affect store prices at a lower rate than at the border.

In the third chapter (with Luis Felipe Cespedes and Patricio Toro), we study whether changes in market competition were a significant driver of the post-pandemic global inflation episode. We empirically assess how firm's markups reacted to high inflation episodes in the last two decades and whether local markets' competitiveness can explain this relationship beyond changes in demand. Using detailed microdata for OECD countries and a staggered difference-in-difference approach, we show that the last inflation episode was different from previous ones. Markups reacted more, and changes in demand were less significant in explaining this reaction. Instead, market competitiveness appears to have played a more significant role through larger firms in relatively more concentrated sectors, which increased less in jurisdictions with stricter antitrust regulations.