Fernando Letelier

How does the composition of tradable income shape financial fragility during sudden stops? Using the Bianchi and Mendoza (2020) systemic sudden stop chronology, I show that economies entering an episode with greater commodity dependence undergo larger adjustment: moving from the 25th to the 75th percentile of pre-crisis exposure is associated with a 2.93 percentage point larger current account reversal one year after onset, alongside larger consumption and equity price losses. I then extend the Fisherian collateral model of Bianchi (2011) to allow commodity exposure to change the sensitivity of tradable income to a common world price. Holding the inherited balance sheet and shock fixed, moving across the empirically mapped exposure interquartile range raises the current account reversal by 4.88 percentage points. The model reveals an offsetting force: when exposure is anticipated, households borrow less ex ante, substantially attenuating the severity differential in stochastic equilibrium. A borrowing rule counterfactual shows that this attenuation reflects endogenous self insurance rather than a weak structural exposure channel. At common leverage, greater exposure also raises the marginal external cost of debt. Financial fragility therefore depends jointly on leverage, the composition of the income backing it, and endogenous balance sheet adjustment.

Quantitative trade models summarize bilateral trade costs with a single iceberg wedge common to all firms. Using Chilean customs records, I show that larger importers pay systematically lower freight rates within product, route, time, and carrier cells; controlling for shipment size attenuates this gradient by about 40 percent, and the profile rises sharply among the smallest firms. I introduce a firm level export cost schedule into the model of Arkolakis et al. (2019). Under CES, the distribution of trade costs carries no first order welfare information beyond the domestic expenditure share and the trade elasticity, and only the trade weighted mean of a firm specific shock matters. With variable markups, the distribution matters through pass-through, the choke price, and entry. Disciplined by the data and recalibrated to the same aggregate moments, freight heterogeneity visibly reshapes export selection but changes welfare modestly: in the 2021–22 freight spike, heterogeneous and comparable uniform shocks differ in welfare by less than 0.1 percentage points.

What inflation expectations are most informative for central banks in open economies? Using a quarterly panel of twelve open economies from 2000 to 2025, I compare one year ahead inflation expectations from non-expert agents and expert forecasters. Unlike recent U.S. evidence, experts are more accurate in both demand and supply driven inflation episodes. The paper's main result is that this expert advantage declines systematically with commodity terms of trade exposure during global supply episodes. The narrowing reflects lower non-expert forecast errors rather than deteriorating expert performance. Fair–Shiller encompassing regressions further show that the non-expert/expert forecast gap becomes increasingly informative about subsequent inflation as exposure rises, with the incremental information most clearly reflected in future services inflation. Contemporaneous exchange rate movements do not account for the exposure gradient. A parsimonious small open economy New Keynesian model shows that this informational channel, rather than commodity transmission alone, narrows the difference between optimal policy responses across demand and supply regimes.

This paper shows that the accuracy and behavior of U.S. inflation expectations depend critically on whether inflation is driven by demand or supply shocks. Combining one year ahead expectations from the SPF, Michigan Survey, and Cleveland Fed with Shapiro's decomposition, we find a reversal in forecast rankings: consumers forecast CPI inflation more accurately than experts in demand driven episodes, while professional and market based expectations dominate in supply driven episodes. Forecast inefficiencies and error persistence are also regime specific. A simple New Keynesian noisy information framework with divine coincidence in demand regimes and its breakdown in supply regimes rationalizes these patterns and their policy implications. A state dependent Taylor rule which conditions on the prevailing demand/supply mix can reduce welfare losses by around 20 percent, highlighting the monetary policy gains from treating expectations as regime contingent rather than uniform.