Carlos D. Payan

Research

Dissertation Committee: Ralf Hepp (Advisor), Johanna Francis, and Patricia Gomez-Gonzalez

Job Market Paper:

The International Transmission of the Global Financial Cycle on Domestic Credit Markets

Abstract: Cycles in global financial markets raise questions about its influence on the cost of capital in small open economies. Using a panel data set of 41 credit establishments over 68 quarters from 2002-2019, I examine if the Global Financial Cycle (GFCy) impacts private sector loan prices in Colombia, a small open emerging economy. I find that the GFCy, by driving portfolio inflows, affects loan prices in the Colombian credit market. During the boom phases of the GFCy, both consumer (household) and commercial (corporate) credit prices decrease. I then expand my analysis and investigate three balance sheet characteristics through which consumer and commercial credit are affected—the capital, non-core liability, and leverage ratios. I find that credit establishments with a high capital or leverage ratio lending to consumers react differently to GFCy shocks than credit establishments with a high non-core liability ratio lending to commercial entities. Results are robust for consumer credit; however, I find that commercial credit estimations are susceptible to model specification.

Working Papers:

International Monetary Spillovers, Financial Interconnectedness, and their effects on Monetary Autonomy

Abstract: Monetary policy spillovers put into question the ability of governments to maintain their monetary policy independence while allowing for open financial markets and a flexible exchange rate regime. This inability of governments violates the monetary policy trilemma, a key principle in international macroeconomics. In this paper, I address the question of whether higher degrees of interconnectedness into global financial markets affect monetary policy independence. I do this by constructing a new and direct measure of interconnectedness using network analysis. Results show that interconnectedness affects the sensitivity of the spillover effects all countries face but there are different levels of sensitivity to interconnectedness between advanced economies (AEs) and emerging market economies (EMEs). These findings provide evidence that interconnectedness has played a role in the co-movement of policy interest rates seen across the world.