Juan M. Sánchez

Bio: Juan M. Sánchez is an academic researcher from Federal Reserve Bank of St. Louis. The author has contributed to research in topics: Debt & Recession. The author has an hindex of 21, co-authored 110 publications receiving 1512 citations. Previous affiliations of Juan M. Sánchez include University of Rochester & Federal Reserve System.

Why Doesn't Technology Flow From Rich to Poor Countries?

Abstract: What determines the technology that a country adopts? While there could be many factors, the e¢ ciency of the country’s …nancial system may play a signi…cant role. To address this question, a dynamic contract model is embedded into a general equilibrium setting with competitive intermediation. The ability of an intermediary to monitor and control the cash ‡ows of a …rm plays an important role in a …rm’s decision to adopt a technology. Can such a theory help to explain the

The IT revolution and the unsecured credit market

Abstract: Consumer bankruptcies rose sharply over the last 20 years in the U.S. economy. During the same period, there was impressive technological progress in the information sector (the IT revolution). At the same time, pricing of unsecured debt changed dramatically. The dispersion of interest rates rose substantially. More importantly, interest rates varied systematically with the borrowers' characteristics in 2004 but not in 1983. This suggests that changes in the information that lenders use to price debt may be behind changes in the unsecured credit market. A model of unsecured borrowing with asymmetric information is developed to analyze this hypothesis. The effect of changes in the cost of information on borrowing and bankruptcy is explained with the help of a two-period version of the model. A calibrated model is used to study the implications of the IT revolution further. Quantitative exercises show that information costs have a significant effect on the bankruptcy rate. Additionally, a drop in information costs generates other changes (e.g. the projection of the borrowers' characteristics on interest rates) similar to what has occurred over the last 20 years.

Optimal State-Contingent Unemployment Insurance

Abstract: Since the probability of finding a job is affected not only by individual effort but also by the aggregate state of the economy, designing unemployment insurance payments conditional on the business cycle could be valuable. This paper answers a fundamental question related to this issue: How should the payments vary with the aggregate state of the economy?

Reconstructing the Great Recession

Abstract: This paper evaluates the role of the construction sector in accounting for the performance of the U.S. economy in the last decade. During the Great Recession (2008-09), employment in the construction sector experienced an unprecedented decline that followed the largest expansion in total employment since the 1950s. Despite the small size of the construction sector, its interlinkages with other sectors in the economy propagate the effect from changes in the demand of residential investment, hence amplifying the effect on the overall economy. An input-output analysis reveals that the construction sector has been an important driver of the dynamics of aggregate employment and output of the U.S. economy through the sectorial interlinkages. The importance of interlinkages is illustrated in a static model and then quantified in a generalized framework that includes fixed and residential investment. The model is calibrated to reproduce the boom-bust dynamics of construction employment in the period 2000-10. We find that construction and its interlinkages account for a large share of the actual changes in aggregate employment and gross domestic product during the expansion and the recession. Through the lens of the standard business cycle accounting, the recession generated in the model, as in the data, is due to the worsening of the labor wedge.

Financial development and economic growth

Abstract: relationship. All subsequent studies confirmed it (see for example King and Levine, 1993, and the review in: Pagano, 1993). Goldsmith used a sample of 35 countries for the period between 1860 and 1963 to show the relationship between income and financial depth measured by the ratio between bank's assets and GDP. He also showed that in periods of rapid growth, financial depth grows faster than income. More details about measuring financial depth can be found in this paper. FINANCIAL DEVELOPMENT AND ECONOMIC GROWTH Velimir Šonje

Finance and Development: A Tale of Two Sectors †

Abstract: Explaining levels of economic development hinges on explaining TFP dierences across coun- tries. In poor countries, total factor productivity (TFP) is particularly low in sectors producing tradable goods. We document that an important dierence between tradable and non-tradable sectors is their average establishment size: Tradable establishments operate at much larger scales. We develop a model co-determining aggregate TFP, sectoral TFP, and scales across industrial sectors. In our model, …nancial frictions disproportionately aect TFP in tradable sectors where production requires larger …xed costs. Our quantitative exercises show that …- nancial frictions explain a substantial part of the observed cross-country relationship between aggregate TFP, sectoral TFP, and output per worker.

Finance and Misallocation: Evidence from Plant-Level Data

Abstract: We use producer-level data to evaluate the role of financial frictions in determining total factor productivity (TFP). We study a model of establishment dynamics in which financial frictions reduce TFP through two channels. First, finance frictions distort entry and technology adoption decisions. Second, finance frictions generate dispersion in the returns to capital across existing producers and thus productivity losses from misallocation. Parameterizations of our model consistent with the data imply fairly small losses from misallocation, but potentially sizable losses from inefficiently low levels of entry and technology adoption. (JEL E32, E44, F41, G32, L60, O33, O47)