http://www.bis.org/cbhub/list/author/author_4414/index.rss Research hub papers by author Fabrizio Orrego en http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2011/Documento-de-Trabajo-22-2011.pdf Central Reserve Bank of Peru Working Papers by Rocio Gondo and Fabrizio Orrego Dedollarization and financial robustness 2011-12-30T06:21:00Z This paper evaluates the qualitative and quantitative implications of financial dedollarization of firms' liabilities on real aggregates in a small open economy model. We extend the standard Cespedes, Chang, and Velasco (2004) model by allowing entrepreneurs borrow in both foreign and domestic currency so as to finance firms' capital needs. A real depreciation reduces the value of firms' net worth whenever there is a currency mismatch in their balance sheets. Under flexible exchange rates, a lower degree of dollarization lessens the negative impact on output and investment, since there is a smaller increase in the cost of external borrowing. The quantitative results show that the balance sheet channel accounts for about 70 percent of the output and investment drop in Peru following the Russian Crisis, and a reduction in debt dollarization would have reduced output drop in 0.9 percentage points of GDP. Dedollarization and financial robustness 2011-12-30T06:21:00Z Full text http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2011/Documento-de-Trabajo-22-2011.pdf Rocio Gondo Fabrizio Orrego Rocio Gondo and Fabrizio Orrego 2011-12 Central Reserve Bank of Peru Working Papers http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2011/Documento-de-Trabajo-13-2011.pdf Central Reserve Bank of Peru Working Papers by Fabrizio Orrego Habit formation and sunspots in overlapping generations models 2011-08-03T06:21:59Z I introduce habit formation into an otherwise standard overlapping generations economy with pure exchange populated by three-period-lived agents. Habits are modeled in such a way that current consumption increases the marginal utility of future consumption. With logarithmic utility functions, I demonstrate that habit formation may give rise to stable monetary steady states in economies with hump-shaped endowment pro?les and reasonably high discount factors. Intuitively, habits imply adjacent complementarity in consumption, which in turn helps explain why income effects are sufficiently strong in spite of logarithmic utility. The longer horizon further strengthens the income effect. Finally, I use the bootstrap method to construct stationary sunspot equilibria for those economies in which the steady state is locally stable. Habit formation and sunspots in overlapping generations models 2011-08-03T06:21:59Z Full text http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2011/Documento-de-Trabajo-13-2011.pdf Fabrizio Orrego Fabrizio Orrego 2011-08 Central Reserve Bank of Peru Working Papers http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2011/Documento-de-Trabajo-14-2011.pdf Central Reserve Bank of Peru Working Papers by Fabrizio Orrego Sequential incompleteness and dynamic suboptimality in stochastic OLG economies with production 2011-08-03T06:21:59Z I study a stochastic overlapping generations model with production and three-period- lived agents. Agents trade bonds and risky capital. Unlike the two-period model, I show that a stationary equilibrium in which prices and allocations depend solely on the aggregate capital stock and the current shock does not exist. The recursive equilibrium becomes the relevant equilibrium concept. For the recursive formulation of the model, markets are sequentially incomplete and hence I show that there is room for Pareto improvements in terms of intergenerational risk sharing. Finally, I examine whether the introduction of capital income taxation improves the allocation of risk. Sequential incompleteness and dynamic suboptimality in stochastic OLG economies with production 2011-08-03T06:21:59Z Full text http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2011/Documento-de-Trabajo-14-2011.pdf Fabrizio Orrego Fabrizio Orrego 2011-08 Central Reserve Bank of Peru Working Papers http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2010/Documento-de-Trabajo-12-2010.pdf Central Reserve Bank of Peru Working Papers by Fabrizio Orrego Demography, Stock Prices and Interest Rates: The Easterlin Hypothesis Revisited 2010-09-29T12:37:59Z During the twentieth century, the U.S. witnessed a cyclical birth rate. This in turn shaped the evolution of the ratio of middle-age to young adults, or MY ratio, which captures the stance of the population pyramid at any given time. In this paper, I study the effects of demographic change, as measured by the MY ratio, on stock prices and interest rates. I construct an equilibrium model in the spirit of Geanakoplos et al. (2004). The model relates the economic fortune of a cohort to its relative size (Easterlin hypothesis) and matches qualitatively the long-run trends in real interest rates and stock prices in the U.S. postwar era. The first prediction of the model is that the price-earnings ratio and stock prices should be in phase with the MY ratio. The second prediction is that real interest rates should move inversely with the MY ratio, except after the peak in the MY ratio. Unlike Geanakoplos et al. (2004), this model does not predict that stock prices should move inversely with real interest rates. On the contrary, this model shows that in a stationary cyclic equilibrium there may be independent movements in stock and bond prices, which are necessary to prevent arbitrage opportunities. Demography, Stock Prices and Interest Rates: The Easterlin Hypothesis Revisited 2010-09-29T12:37:59Z Full text http://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2010/Documento-de-Trabajo-12-2010.pdf Fabrizio Orrego Fabrizio Orrego 2010-09 Central Reserve Bank of Peru Working Papers