The doors are always open here! Come back whenever you want!

Finally, it was fantastic to have an academic excuse to reconnect with friends that I haven't seen in a very long time 👋: David Echeverry, Cesar E. Tamayo, and Luis Felipe Saenz.

The opportunity to organize a conference this big taught me many lessons, but the most important one is what a great team Eugenia Andreasen, Humberto Martínez Beltrán, and I are 🤝. Couldn't have done it without them 🙏.

This meeting was also particularly special for me, as we not only had Christiane (a key member of my Ph.D. advisor committee at @ndecon.bsky.social) but also the SCE presented the 2025 David A. Kendrick Distinguished Service Award to John Stachurski 🏆. They have both made a huge impact on my career.

As part of the conference, we featured a full-day workshop on "Heterogenous Agents Models: A Toolkit for Policy Makers" jointly organized by Central Bank of Chile Research and CEMLA. A big thank you to Matias Ossandon Busch for his support.

This marked the first time the event was hosted in Latin America 👏. A huge thank you to our distinguished plenary speakers 🎤—Enrique Mendoza, Christiane Baumeister @ndecon.bsky.social , and John Stachurski—for their insightful contributions .

Proud of this work with @juanherreno.bsky.social. We believe these insights are critical for policymakers in emerging economies.You can find our paper in the Journal of International Economics, Vol 157.

Big thanks to my advisors at @ndecon.bsky.social!

📝 Link: shorturl.at/JdJhr

To sum up: Imperfect information about income shocks, when combined with borrowing constraints, is a potent source of economic instability. Optimal macroprudential policies are even more beneficial in this setting, and their design must account for these information frictions.

In our model, this shift occurs because uninformed households, fearing the non-tradable shock might signal a worse, permanent downturn, reduce borrowing anyway, even if their borrowing capacity technically increases. The planner then doesn't need to tax as aggressively

Consider a temporary negative shock to "non-tradable" income:
🔹 With perfect info, the best policy is often to RAISE taxes as this income falls (procyclical).
🔹 With imperfect info, our model shows the optimal tax becomes COUNTERCYCLICAL – the planner reduces taxes as this non-tradable income falls!

However, one of the most fascinating results for us was how imperfect information alters the optimal tax response depending on the specific component of income that's hit by a shock. It's not a one-size-fits-all policy.

A really important result from our analysis: this imperfect information makes well-designed policy even more critical. We found the welfare gains from an optimal debt tax can more than double when agents can't perfectly distinguish shock types. The average optimal tax also tends to be higher.

How can policymakers address this? We analyze "macroprudential policy," specifically taxing foreign debt. A central planner, who can internalize the economy-wide effects that individual households might not, can use this tool to improve stability.

So why is this 'not knowing' the type of income shock so crucial in our model? Agents use available data (we model this with a Kalman filter) to guess. But their beliefs can diverge from reality!

What did we find? This combination – not quite knowing if good/bad times are permanent AND having borrowing limits – can significantly increase economic instability. It can lead to "overborrowing" and make financial crises more frequent.

Alongside this, we incorporate a common feature: how much households can borrow is limited by a "collateral constraint," often tied to their income.

We explore small open economies where households face a tricky situation. They see their income change, but it's hard to tell if it's a temporary blip or a long-lasting shift in their economic conditions. This is due to "imperfect information". #InformationFrictions

www.rebtel.com/en/#%7B%22co...

Great paper. Bequest motives, medical issues, wage risks and marriage/divorce are important drivers of lifetime wealth.

Also, great to see the joint work on one of our great former RAs at the Bank— @johanatch.bsky.social