WorldCat Identities

Arellano, Cristina

Works: 39 works in 123 publications in 1 language and 727 library holdings
Roles: Author, Scenarist
Classifications: HB1, 330
Publication Timeline
Most widely held works by Cristina Arellano
Credit frictions and 'sudden stops' in small open economies : an equilibrium business cycle framework for emerging market crises by Cristina Arellano( Book )

13 editions published in 2002 in English and held by 105 WorldCat member libraries worldwide

Financial frictions are a central element of most of the models that the literature on emerging markets crises has proposed for explaining the Sudden Stop' phenomenon. To date, few studies have aimed to examine the quantitative implications of these models and to integrate them with an equilibrium business cycle framework for emerging economies. This paper surveys these studies viewing them as ability-to-pay and willingness-to-pay variations of a framework that adds occasionally binding borrowing constraints to the small open economy real-business-cycle model. A common feature of the different models is that agents factor in the risk of future Sudden Stops in their optimal plans, so that equilibrium allocations and prices are distorted even when credit constraints do not bind. Sudden Stops are a property of the unique, flexible-price competitive equilibrium of these models that occurs in a particular region of the state space in which negative shocks make borrowing constraints bind. The resulting nonlinear effects imply that solving the models requires non-linear numerical methods, which are described in the survey. The results show that the models can yield relatively infrequent Sudden Stops with large current account reversals and deep recessions nested within smoother business cycles. Still, research in this area is at an early stage and this survey aims to stimulate further work
Firm dynamics and financial development by Cristina Arellano( )

10 editions published in 2009 in English and held by 75 WorldCat member libraries worldwide

This paper studies the impact of cross-country variation in financial market development on firms' financing choices and growth rates using comprehensive firm-level datasets. We document that in less financially developed economies, small firms grow faster and have lower debt to asset ratios than large firms. We then develop a quantitative model where financial frictions drive firm growth and debt financing through the availability of credit and default risk. We parameterize the model to the firms' financial structure in the data and show that financial restrictions can account for the majority of the difference in growth rates between firms of different sizes across countries
Internal debt crises and sovereign defaults by Cristina Arellano( )

9 editions published in 2008 in English and held by 67 WorldCat member libraries worldwide

In this paper, we use data from developing countries to argue that sovereign defaults are often caused by fiscal pressures generated by large-scale domestic defaults. We argue that these systemic domestic defaults are caused by shocks best interpreted as being non-fundamental. We construct a model that is consistent with these observations. The key ingredient of the model is that it is impossible to liquidate large amounts of entrepreneurial assets. This restriction generates the possibility of a domestic coordinated default crisis, in which domestic borrowers find it optimal to default because all other borrowers are also defaulting. We conclude that avoiding sovereign defaults requires better internal institutions, not better external ones
Sovereign default risk and firm heterogeneity by Cristina Arellano( )

5 editions published in 2017 in English and held by 65 WorldCat member libraries worldwide

This paper studies the recessionary effects of sovereign default risk using firm-level data and a model of sovereign debt with firm heterogeneity. Our environment features a two-way feedback loop. Low output decreases the tax revenues of the government and raises the risk that it will default on its debt. The associated increase in sovereign interest rate spreads, in turn, raises the interest rates paid by firms, which further depresses their production. Importantly, these effects are not homogeneous across firms, as interest rate hikes have more severe consequences for firms that are in need of borrowing. Our approach consists of using these cross-sectional implications of the model, together with micro data, to measure the effects that sovereign risk has on real economic activity. In an application to Italy, we find that the progressive heightening of sovereign risk during the recent crisis was responsible for 50% of the observed decline in output
The dynamic implications of foreign aid and its variability by Cristina Arellano( )

5 editions published in 2005 in English and held by 64 WorldCat member libraries worldwide

The paper examines the effects of aid and its volatility on consumption, investment, and the structure of production in the context of an intertemporal two-sector general equilibrium model. A permanent flow of aid finances mainly consumption, a result consistent with the historical failure of aid inflows to translate into sustained growth. Shocks to aid are reflected mainly in investment fluctuations, as a result of consumption smoothing. Aid shocks result in substantial welfare losses, suggesting that aid variability should be taken into account in designing aid architecture. These results are consistent with the evidence from cross-country regressions of manufactured exports
Linkages across sovereign debt markets by Cristina Arellano( )

6 editions published in 2013 in English and held by 57 WorldCat member libraries worldwide

We develop a multicountry model in which default in one country triggers default in other countries. Countries are linked to one another by borrowing from and renegotiating with common lenders with concave payoffs. A foreign default increases incentives to default at home because it makes new borrowing more expensive and defaulting less costly. Foreign defaults tighten home bond prices because they lower lenders' payoffs. Foreign defaults make home default less costly by lowering future recoveries, because countries can extract more surplus if they renegotiate simultaneously. In our model, the home country may default only because the foreign country is defaulting. This dependency arises during fundamental foreign defaults, where the foreign country defaults because of high debt and low income, and also during self-fulfilling defaults, where both countries default only because the other is defaulting. The simultaneity in defaults induces a correlation in interest rate spreads across countries. The model can rationalize some of the recent economic events in Europe
Financial frictions and fluctuations in volatility by Cristina Arellano( )

5 editions published between 2012 and 2017 in English and held by 50 WorldCat member libraries worldwide

During the recent U.S. financial crisis, the large decline in aggregate output and labor was accompanied by both a tightening of financial conditions and a large increase in the dispersion of growth rates across firms. The tightened financial conditions manifested themselves as increases in firms' credit spreads and decreases in both equity payouts and debt purchases. These features motivate us to build a model in which increased volatility of firm level productivity shocks generates a downturn and worsened credit conditions. The key idea in the model is that hiring inputs is risky because financial frictions limit firms' ability to insure against shocks. Hence, an increase in idiosyncratic volatility induces firms to reduce their inputs to reduce such risk. We find that our model can generate most of the decline in output and labor in the Great Recession of 2007-2009 and the observed tightening of financial conditions
External and public debt crises by Cristina Arellano( )

5 editions published in 2015 in English and held by 49 WorldCat member libraries worldwide

The recent debt crises in Europe and the U.S. states feature similar sharp increases in spreads on government debt but also show important differences. In Europe, the crisis occurred at high government indebtedness levels and had spillovers to the private sector. In the United States, state government indebtedness was low, and the crisis had no spillovers to the private sector. We show theoretically and empirically that these different debt experiences result from the interplay between differences in the ability of governments to interfere in private external debt contracts and differences in the flexibility of state fiscal institutions
Sovereign risk contagion by Cristina Arellano( )

4 editions published in 2017 in English and held by 48 WorldCat member libraries worldwide

We develop a theory of sovereign risk contagion based on financial links. In our multi-country model, sovereign bond spreads comove because default in one country can trigger default in other countries. Countries are linked because they borrow, default, and renegotiate with common lenders, and the bond price and recovery schedules for each country depend on the choices of other countries. A foreign default increases the lenders' pricing kernel, which makes home borrowing more expensive and can induce a home default. Countries also default together because by doing so they can renegotiate the debt simultaneously and pay lower recoveries. We apply our model to the 2012 debt crises of Italy and Spain and show that it can replicate the time path of spreads during the crises. In a counterfactual exercise, we find that the debt crisis in Spain (Italy) can account for one-half (one-third) of the increase in the bond spreads of Italy (Spain)
Default risk, sectoral reallocation, and persistent recessions by Cristina Arellano( )

5 editions published in 2017 in English and held by 46 WorldCat member libraries worldwide

Sovereign debt crises are associated with large and persistent declines in economic activity, disproportionately so for nontradable sectors. This paper documents this pattern using Spanish data and builds a two-sector dynamic quantitative model of sovereign default with capital accumulation. Recessions are very persistent in the model and more pronounced for nontraded sectors because of default risk. An adverse domestic shock increases the likelihood of default, limits capital inflows, and thus restricts the ability of the economy to exploit investment opportunities. The economy responds by reducing investment and reallocating capital toward the traded sector to support debt service payments. The real exchange rate depreciates, a reflection of the scarcity of traded goods. We find that these mechanisms are quantitatively important for rationalizing the experience of Spain during the recent debt crisis
Dollarization and financial integration by Cristina Arellano( Book )

15 editions published in 2007 in English and held by 37 WorldCat member libraries worldwide

"How does a country's choice of exchange rate regime impact its ability to borrow from abroad? We build a small open economy model in which the government can potentially respond to shocks via domestic monetary policy and by international borrowing. We assume that debt repayment must be incentive compatible when the default punishment is equivalent to permanent exclusion from debt markets. We compare a floating regime to full dollarization. We find that dollarization is potentially beneficial, even though it means the loss of the monetary instrument, precisely because this loss can strengthen incentives to maintain access to debt markets. Given stronger repayment incentives, more borrowing can be supported, and thus dollarization can increase international financial integration. This prediction of theory is consistent with the experiences of El Salvador and Ecuador, which recently dollarized, as well as with that of highly-indebted countries like Italy which adopted the Euro as part of Economic and Monetary Union. In each case, spreads on foreign currency government debt declined substantially around the time of regime change"--Federal Reserve Board web site
Contract enforcement and firms' financing by Cristina Arellano( Book )

3 editions published in 2007 in English and held by 15 WorldCat member libraries worldwide

Default and the maturity of structure in sovereign bonds by Cristina Arellano( Book )

2 editions published in 2008 in English and held by 9 WorldCat member libraries worldwide

International debt in emerging economies by Cristina Arellano( )

2 editions published in 2004 in English and held by 3 WorldCat member libraries worldwide

Migrant women's handcrafts and exhibition : report by Cristina Arellano( Book )

2 editions published in 1983 in English and held by 2 WorldCat member libraries worldwide

Une fête de toutes les couleurs( Visual )

in Undetermined and held by 2 WorldCat member libraries worldwide

External and public debt crises by Cristina Arellano( )

1 edition published in 2015 in English and held by 2 WorldCat member libraries worldwide

La fête( Visual )

in Undetermined and held by 2 WorldCat member libraries worldwide

Une mauvaise conduite( Visual )

in Undetermined and held by 2 WorldCat member libraries worldwide

Firm dynamics and financial development by Cristina Arellano( Book )

2 editions published in 2009 in English and held by 2 WorldCat member libraries worldwide

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Audience level: 0.66 (from 0.59 for Sovereign ... to 0.99 for La fête ...)

English (94)