I am a Research Economist at Banco de España in the Monetary Policy and Capital Markets Division. My research interests are asset pricing, intermediation, and market microstructure.
Working Papers
Good Inflation, Bad Inflation: Implications for Risky Asset Prices Joint with Berardino Palazzo and Ram Yamarthy April 2024
Using inflation swap prices, we study how expected inflation is priced in firm-level credit spreads and equity returns, and uncover evidence of a time-varying inflation sensitivity. In times of market-perceived "good inflation," when inflation news is positively correlated with real economic growth, shocks to expected inflation substantially reduce corporate credit spreads and raise equity valuations. Meanwhile in times of "bad inflation," these effects are attenuated and the opposite can take place. These dynamics naturally arise in an equilibrium asset pricing model with a time-varying inflation-growth relationship and persistent macroeconomic expectations.
Inflation Risk and Yield Spread Changes May 2024
Inflation risk explains a significant share of the systematic variation of yield spread changes beyond standard structural factors and intermediation frictions. Movements in expected inflation directly affect the real value of debt and, consequently, bond prices. I show that shocks to inflation expectation, volatility, and cyclicality are significant determinants of yield spread changes. A model with a stochastic price index and sticky cash flow explains these patterns and delivers additional implications with empirical support. Loading patterns become more pronounced with higher ex-ante default risk and cash-flow flexibility but weaken during periods of high expected inflation.
Work in Progress
Momentum Spillovers in Corporate Bonds Joint with Katsiaryna Falkovich and Nils Friewald
