Cristina Arellano’s research while affiliated with Federal Reserve Bank of Minneapolis and other places

... The process is estimated using annual PSID data by Krueger et al. (2016) and is converted to a quarterly process following their methodology. We discretize this process into a ten-state Markov chain following Aguiar et al. (2023). The mean value of e i t equals one, ensuring that the total supply of efficiency units of labor equals one. ...

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Pricing Inequality

... Other countries, such as Brazil and South Africa 1 , suffer from a massive spread on their 5-year sovereign credit default swap (CDS). In the current economic landscape, Kanno (2024), Prabheesh et al. (2024), and Arellano et al. (2024) emphasize the importance of understanding the correlation between a country's default risk and its broader market dynamics. ...

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Dynamic linkages and determinants of sovereign CDS and exchange rates: evidence from G7 and BRICS

... 9 Perhaps surprisingly, it would be unrealistic to suppose that debt decreases when default occurs. Indeed, Arellano et al. (2023) show that debt is more likely to increase following a restructuring. As in their paper, the model of monetary/fiscal interactions that we develop in Section II implies that default serves to alleviate short-term fiscal pressure, not to reduce the debt load permanently. ...

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The Term Structure of Interest Rates in a Heterogeneous Monetary Union

... Aside from income inequality, research revealed other severe discrepancies in the COVID-19 pandemic between AE and EMDE, particularly in terms of mortality (Ahmed et al. 2020) and vaccination (Arellano et al. 2023;Tatar et al. 2021), which seemed to widen the gap between them. Nonetheless, wealthy nations had lost more life years per capita than poorer countries, owing to the population's older age structure in richer countries and a disease with a highly age-selective lethality (Ferreira 2021). ...

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The Widening of the North–South Divide: Debt Sustainability in a World Weakened by COVID-19

... Conversely, if elderly individuals received aid, it would primarily increase consumption (Dalgaard et al., 2004). This result aligns with the findings from infinite lifetime models, such as the Cass-Koopman framework, where aid would generate a wealth effect without affecting the saving rate (Arellano et al., 2009;Obstfeld, 1999;Scholl, 2009). None of these articles, however, have accounted for the possibility of a nonlinear relationship between aid and growth, let alone a hump-shaped relationship. ...

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Foreign aid and corruption: Unveiling the obstacles to effective development

... The Internet Appendix may be found in the online version of this article. 6 See Calvo (1988), Cole and Kehoe (2000), Aguiar et al. (2015), Reis (2013), Corsetti and Dedola (2016), Camous and Cooper (2019), Bacchetta et al. (2018), Nuño et al. (2023), Na et al. (2018), Arellano et al. (2020), and Bianchi and Mondragon (2022). and how they affect the entire term structure of interest rates. ...

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The Term Structure of Interest Rates in a Heterogeneous Monetary Union

... One insight of my model is that markups create a wedge between interest rates and the marginal product of capital. A similar result has been contemporaneously shown by Eggertsson, Mehrotra, and Robbins (2019), Ball and Mankiw (2021), and Aguiar, Amador, and Arellano (2021). In addition to this, a contribution of my paper is to show that bubbles can stimulate competition and have crowding-in effects on capital accumulation. ...

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Asset bubbles and product market competition

... Some of them find that aid has a crowding in effect on FDI (Thangamani, 2014;Opoku, 2015) while others find a negative effect (see for example Arellano et al., 2008). ...

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Foreign Aid, Political Power and FDI: Do Aid-dependent Institutions Facilitate Investment in Africa?

... In addition to equities, ample articles concentrated on the influence of the pandemic on other asset classes. These include, in particular, commodities (Bakas and Triantafyllou, 2020;Corbet et al., 2020b;Devpura and Narayan, 2020;Iyke, 2020a;Narayan, 2020;Umar et al., 2020), exchange rates (Iyke, 2020b), cryptocurrencies (Conlon and McGee, 2020;Corbet et al., 2020b;Mnif et al., 2020;Umar and Gubareva, 2020), real estate (Ling et al., 2020), or bonds (Arellano et al., 2020;He et al., 2020;Ji et al., 2020;Sène et al., 2020). ...

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The Quest for Multidimensional Financial Immunity to the COVID-19 Pandemic: Evidence from International Stock Markets

... In line with the conclusions of Schabert and van Wijnbergen (2014) , Arellano et al. (2020) studied the 2015 Brazilian downturn, characterized by the combination of increased sovereign risk spread, high inflation, and tight monetary policy. Under sovereign default risk, they find that a contractionary monetary policy tends to be less powerful despite the relatively high policy interest rate likely to occur in this scenario. ...

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The Relationship between Fiscal and Monetary Policies in Colombia: An Empirical Exploration of the Credit Channel