Browsing by Author "Machado, Caio"
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- ItemCoordinating in financial crises(2024) Machado, CaioWhy do some financial crises lead to macroeconomic disasters, while others barely affect the real economy? This paper proposes a model to study unusually deep financial crises. Deep crises arise from the interplay of demand-driven coordination failures on the productive sector and weak banks' balance sheets. There is a dynamic feedback between banks' balance sheets and coordination. Coordination failures happen when banks suffer large losses and substantially reduce asset prices and welfare, even if the economy is in good times and they rarely happen. Financial crises that start from similar initial shocks can feature very heterogeneous real effects.
- ItemCovid-19 contagion, economic activity and business reopening protocols(2021) Janiak, Alexandre; Machado, Caio; Turen, JavierThis paper studies the impact of sanitary protocols aimed at reducing the contagion by Covid-19 during the production and consumption of goods and services. We augment a heterogeneous SIR model with a two-way feedback between contagion and economic activity, allowing for firm and sector heterogeneity. While protocols are a burden for firms (especially SMEs), they may enhance economic activity by avoiding infections that reduce the labor supply. Using Chilean data, we calibrate the model and assess the impact of recommended firm protocols on contagion and economic activity in the after-lockdown period. Our quantitative results suggest that: (i) A second wave of infections is likely in the absence of protocols; (ii) Protocols targeted at some sectors can reduce deaths while at the same time improving economic conditions; (iii) Protocols applied widely have a negative effect on the economy. We also find that applying strict protocols to a few sectors is generally preferable to applying milder protocols to a larger number of sectors, both in terms of health and economic benefits. (c) 2020 Elsevier B.V. All rights reserved.
- ItemDesajuste cambiario y fragilidad financiera(2023) Valdivieso Pinochet, Raimundo Tomás; Machado, Caio; García Lembergman, Ezequiel; Pontificia Universidad Católica de Chile. Instituto de EconomíaEste artículo analiza las implicancias del tipo de cambio en la probabilidad de quiebra y corridas bancarias en un contexto de crisis financieras. La constante globalización de los mercados bancarios ha ampliado las posibilidades de inversión en distintas monedas, aumentando la importancia del tipo de cambio en el corto y largo plazo impacta en la estabilidad financiera. Considerando una extensión del modelo de Rochet y Vives. (2004), exploraremos cómo la fluctuación del tipo de cambio impacta en los equilibrios a corto y largo plazo. Destacamos la relevancia de abordar los descalces cambiarios y su conexión con riesgos sistémicos con el fin de proporcionar lecciones para mejorar la regulación bancaria y promover la estabilidad financiera y económica.
- ItemOptimal Capital Structure with Stock Market Feedback*(2023) Machado, Caio; Pereira, Ana ElisaThis article studies optimal capital structure when firms learn from financial markets. We present a tractable model of stock market feedback with imperfect information aggregation. Debt issuance affects speculators' incentives to trade both directly, by changing the payoff structure of equity holders, and indirectly, through an asset substitution effect. We show that issuing debt can increase market informativeness and firm value, and may eliminate a coordination failure equilibrium with no provision of market information. We derive the optimal capital structure in this setting and present novel empirical predictions regarding the relationship between market frictions, market informativeness, and capital structure. Once the effect of debt on market informativeness is considered, risky debt does not necessarily lead to risk shifting.
- ItemPolítica monetaria y precio de acciones bancarias: una estrategia de identificación por heterocedasticidad(2023) Zavala Salgado, Selvin Javier; Machado, Caio; García Lembergman, Ezequiel; Pontificia Universidad Católica de Chile. Instituto de EconomíaEste artículo estudia el efecto de las variaciones de la tasa de política monetaria sobre el precio de las acciones bancarias en Estados Unidos. Para ello, se utiliza un enfoque de alta frecuencia que permite identificar variaciones exógenas en la tasa de política monetaria, basado en la heterocedasticidad de la serie de la tasa de interés de corto plazo, aprovechando la mayor volatilidad presente en los días de reunión de la FOMC respecto a los días previos. En ese sentido, los resultados indican que los cambios no anticipados en las tasas de interés de corto plazo tienen un impacto negativo y significativo en el precio de las acciones bancarias. Por ejemplo, un aumento inesperado de 25 pb en la tasa de política monetaria se relaciona con una disminución de 1.03% en el precio de las acciones bancarias. Este efecto se vuelve mayor después de 2009, posiblemente debido a mayores deposits beta de cada banco y a las bajas tasas de interés posteriores a la crisis financiera. Además, se encontró un efecto heterogéneo, dado que los bancos más grandes, con un market share superior al resto, pueden aminorar este impacto en un 0.49%.
- ItemUneven recessions and optimal firm subsidies☆(2024) Machado, CaioHow should policymakers distribute firm subsidies when supply shocks hit some firms and spill over to others through demand externalities? I propose a model to answer that question. The optimal policy depends on the severity of the supply shock and the degree of substitution across goods. If shocks are not too large or widespread, it is optimal to subsidize only firms not hit by supply shocks. For larger and more widespread shocks, the results depend on the elasticity of substitution: If complementarities across the varieties produced by firms are high, firms facing supply shocks should be prioritized, and the opposite is true if complementarities are low.