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Author:Faia, Ester 

Working Paper
Ramsey monetary policy and international relative prices

We analyze welfare maximizing monetary policy in a dynamic two-country model with price stickiness and imperfect competition. In this context, a typical terms of trade externality affects policy interaction between independent monetary authorities. Unlike the existing literature, we remain consistent to a public finance approach by an explicit consideration of all the distortions that are relevant to the Ramsey planner. This strategy entails two main advantages. First, it allows an accurate characterization of optimal policy in an economy that evolves around a steady-state which is not ...
International Finance Discussion Papers , Paper 798

Working Paper
Dynamic Labor Reallocation with Heterogeneous Skills and Uninsured Idiosyncratic Risk

Occupational specificity of human capital motivates an important role of occupationalreallocation for the economy’s response to shocks and for the dynamics of inequality.We introduce occupational mobility, through a random choice model with dynamicvalue function optimization, into a multi-sector/multi-occupation Bewley (1980)-Aiyagari (1994) model with heterogeneous income risk, liquid and illiquid assets, priceadjustment costs, and in which households differ by their occupation-specific skills.Labor income is a combination of endogenous occupational wages and idiosyncraticshock. ...
Working Paper Series , Paper 2021-16

Working Paper
Financial globalization, financial frictions and optimal monetary policy

How should monetary policy be optimally designed in an environment with high degrees of financial globalization? To answer this question we lay down an open economy model where net lending toward the rest of the world is constrained by a collateral constraint motivated by limited enforcement. Borrowing is secured by collateral in the form of durable goods whose accumulation is subject to adjustment costs. We demonstrate that, although this economy can generate persistent current account deficits, it can also deliver a stationary equilibrium. The comparison between different monetary policy ...
Globalization Institute Working Papers , Paper 52

Working Paper
Cross-border resolution of global banks

Most recent regulations establish that resolution of global banking groups shall be done according to bail-in procedures and following a Single Point of Entry (SPE) as opposed to a Multiple Point of Entry (MPE) approach. The latter requires parent holding of global groups to put up front the equity capital needed to absorb losses possibly emerging in foreign subsidiaries branches. No model rationalized so far such resolution regime. We build a model of optimal design of resolution regimes and compare three regimes: SPE with cooperative authorities, SPE with non-cooperative authorities and MPE ...
Globalization Institute Working Papers , Paper 236

Conference Paper
Ramsey monetary policy and international relative prices

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