Aleksei Oskolkov

I develop a heterogeneous-country model of the world economy to study the distributional impact of aggregate capital flight episodes. A global intermediary borrows from all countries and invests in their risky assets. Wealth heterogeneity between countries arises endogenously due to idiosyncratic shocks. A single global factor that combines the intermediary’s wealth and risk-taking capacity determines capital inflows and risk premia in every country. A shock to the intermediary’s risk-taking capacity generates global capital flight. Investors from rich countries use their external savings to replace foreign demand for domestic assets. These countries experience a “retrenchment” event: a sizable fall in outward flows. Their risky assets appreciate on impact. In poor countries, investors cannot replace foreign demand without a sharp rise in risk premia. Their asset markets adjust through prices rather than quantities, and prices fall. Estimating the model, I find that global financial shocks explain a quarter of the time-series variation in aggregate capital flows and a third of the variation in the relative performance of assets in advanced economies compared to emerging markets.

I describe a value-at-risk constraint that induces long-lived investors to choose static mean-variance portfolios with time-varying risk tolerance. This allows incorporating risk aversion shocks into dynamic models while keeping portfolios easy to aggregate across heterogeneous investors. In equilibrium, asset prices follow standard risk-neutral pricing equations with one additional term that depends on the wealth distribution through a single scalar. I provide a foundation for the value-at-risk constraint through a version of robustness concerns, where investors fear model misspecification and try to account for adverse alternative scenarios. I then illustrate the practicality of value-at-risk in a sovereign debt model with a cross-section of countries. Aggregate shocks to lenders’ constraints create endogenous pricing risk, global interest rate risk, and a volatile common component in spreads that is orthogonal to fundamentals. I show that, despite this rich upside, solving for global equilibria with value-at-risk constraints requires minimal departures from models with risk-neutral lenders.

Firms' capital investments are lumpy and asymmetric, with disinvestments being less frequent and smaller than positive investments. We present a tractable model that reproduces the observed frequency and size distribution of investments by assuming that capital investment is subject to random fixed costs. We provide an inverse map to recover the model's primitives: in particular, we use the size distribution of investment to identify the underlying distribution of adjustment costs, as well as other fundamental parameters such as the drift and volatility of the firm's productivity. We apply the method to panel data on investments by Italian firms. We use the identified model to quantify the capital adjustment costs and to document their asymmetric nature: disinvestments are more costly than investments. We explore the extent to which these asymmetries imply a non-linear propagation of aggregate productivity shocks.

We give a full analytic characterization of a large class of sticky-price models where the firm's price setting behavior is described by a generalized hazard function. Such a function allows for a vast variety of empirical hazards to be fitted. This setup is microfounded by random menu costs as in Caballero and Engel (1993) or, alternatively, by information frictions as in Woodford (2009). We establish two main results. First, we show how to identify all the primitives of the model, including the distribution of the fundamental adjustment costs and the implied generalized hazard function, using the distribution of price changes. Second, we derive a sufficient statistic for the aggregate effect of a monetary shock: given an arbitrary generalized hazard function, the cumulative impulse response of output to a once-and-for-all monetary shock is proportional to the ratio of the kurtosis of the steady-state distribution of price changes over the frequency of price adjustment. We prove that Calvo's model yields the upper bound and Golosov and Lucas's model the lower bound on this measure within the class of random menu cost models.

This paper studies the role of exchange rate regimes in shaping the distributional effects of external monetary shocks. I model a small open economy where agents differ in wealth and in exposure to international trade, producing either tradable or non-tradable goods. The central bank responds to a foreign interest rate hike by a monetary tightening to stabilize the exchange rate or lets the currency depreciate, keeping the interest rate low. I find that exchange rate flexibility distributes consumption gains to the poorer agents. The monetary tightening required to stabilize the currency disproportionately affects their disposable income through interest payments on loans and falling wages. Attempts to fix the exchange rate increase consumption inequality. Flexibility also benefits the non-tradable sector because conditions in this sector are more sensitive to domestic demand and sharply deteriorate when domestic interest rates rise.

This paper studies macroprudential policy for dollarization of domestic financial flows. We model a small open economy with entrepreneurs and workers who can save and borrow in domestic currency and in dollars. Entrepreneurs face a borrowing limit denominated in domestic currency, which makes dollar debt on their balance sheets especially disruptive in times of exchange rate depreciation. Falling output causes additional depreciation, creating a debt-deflation spiral that provides a rationale for de-dollarization. On the other hand, much of this dollar debt constitutes savings of domestic workers and provides them with insurance against depreciation events. We characterize social marginal benefits and costs of de-dollarization under this trade-off. We find that social marginal costs are associated with a deterioration in risk-sharing and can be expressed in terms of the interest rate premium on the dollar assets. These costs are of second order around the allocation without intervention.