The efficiency of financial markets with high inflation

In a two period general equilibrium model with incomplete asset markets, it is shown that the contraction of nominal financial markets that occurs during high inflations can result from the variability of the future rate of inflation and from large bankruptcy costs. If the probability that inflation in the future will be high is sufficiently large, then, for a generic set of endowments, an increase in the variability of future prices reduces the utility possibilities set. In economies with only nominal assets more variable future prices lead to a Pareto fall in social welfare

The Elasticity of Substitution in Demand for Non-Tradable Goods in Latin America: The Case of Argentina

The objective of this paper is to estimate the elasticity of substitution in the demand for non-tradable goods relative to tradable goods in Argentina. This parameter plays a crucial role in the analysis of the macroeconomic equilibrium of a small open economy (Mendoza, Galindo and Izquierdo, 2003). Using two data sets, estimates of approximately 0. 40 and 0. 48, respectively, are found for this elasticity.

Currencies and the Allocation of Risk: The Welfare Effects of a Monetary Union.

This article applies general equilibrium theory to investigate how a monetary union affects the efficiency of the allocation of risks in an economy with incomplete asset markets

Understanding Productivity During the Argentine Crisis

This paper studies resource misallocation in the Argentine manufacturing (1997-2002) sector using the methodology of Hsieh and Klenow (2008). The study shows that the potential gains in terms of aggregate total factor productivity of equalizing marginal productivities of factor inputs across firms in narrowly defined industries is between 50% and 55% in relatively normal years, slightly above the 43% found by HK for the US. During the 2002 crisis the reallocation gains climbed to 60/80%. Using HK's concept of TFPR as a measure of wedges in marginal products across firms, we find that the dispersion of wedges across firms in 1997 is similar to the USA one and in 2002 it is 20% higher; and that TFPR is strongly correlated with firm level productivity (and size). Firm productivity and TFPR are positively correlated with size, age, exporting status and foreign ownership, indicating that more productive firms are likely to be larger, older, exporters, foreign owned and have relatively higher marginal products. These results should be taken with caution due to the measurement error introduced by the coarseness of the factor input data available.