Fernando Letelier

This paper studies whether commodity exporter status helps explain why sudden stops are more severe in some economies than in others. Using a panel of advanced and emerging economies, I show that the most robust difference between commodity exporters and non-commodity exporters is the size of the external adjustment during sudden stops. In the main local projection difference in differences specification, commodity exporters experience current account reversals about 112 percent larger than non-commodity exporters one year after sudden stop onset, and the reversal premium is persistent across three full years after onset. Consumption, investment, and stock prices also fall significantly more in commodity exporters, with effects persistent across all post-crisis horizons. To explain these facts, I extend the Fisherian sudden stop framework of Bianchi (2011) by introducing commodity prices into tradable income. A decline in commodity prices reduces tradable income and collateral values, tightening borrowing constraints and amplifying crises through Fisherian deflation, especially in economies with larger commodity exposure. Calibrating the model to Chile and to a moderate commodity exporter benchmark, I show that this mechanism generates the observed ordering of crisis severity and accounts for a large share of the CE/NCE differential in current account reversals and consumption losses. The model also implies substantially larger welfare gains from macroprudential policy in commodity exporting economies, providing a rationale for stronger precautionary buffers in commodity dependent economies.

What inflation expectations are most informative for central banks in open economies? Using a quarterly panel of twelve open economies from 2000 to 2025, I compare one year ahead inflation expectations from non-expert agents and expert forecasters. Unlike recent U.S. evidence, experts are more accurate in both demand and supply driven inflation episodes. The paper's main result is that this expert advantage declines systematically with commodity terms of trade exposure during global supply episodes. The narrowing reflects lower non-expert forecast errors rather than deteriorating expert performance. Fair–Shiller encompassing regressions further show that the non-expert/expert forecast gap becomes increasingly informative about subsequent inflation as exposure rises, with the incremental information most clearly reflected in future services inflation. Contemporaneous exchange rate movements do not account for the exposure gradient. A parsimonious small open economy New Keynesian model shows that this informational channel, rather than commodity transmission alone, narrows the difference between optimal policy responses across demand and supply regimes.

This paper shows that the accuracy and behavior of U.S. inflation expectations depend critically on whether inflation is driven by demand or supply shocks. Combining one year ahead expectations from the SPF, Michigan Survey, and Cleveland Fed with Shapiro's (2024) decomposition, we find a reversal in forecast rankings: consumers forecast CPI inflation more accurately than experts in demand driven episodes, while professional and market based expectations dominate in supply driven episodes. Forecast inefficiencies and error persistence are also regime specific. A simple New Keynesian noisy information framework with divine coincidence in demand regimes and its breakdown in supply regimes rationalizes these patterns and their policy implications. A state dependent Taylor rule which conditions on the prevailing demand/supply mix can reduce welfare losses by around 20 percent, highlighting the monetary policy gains from treating expectations as regime contingent rather than uniform.

This paper introduces iceberg transportation costs that depend on firm productivity into a model of international trade with monopolistic competition, firm level heterogeneity, and both constant and variable markups, following the framework of Arkolakis et al. (2019). Using shipment level customs data from Chile, I show that larger firms face systematically lower trade costs: a 1% increase in a firm's total imports is associated with a 0.4–0.6 percentage point decline in its iceberg transport cost, measured as freight over CIF. This evidence challenges the standard assumption that trade costs are uniform across firms within a given origin-destination pair. I incorporate a productivity dependent iceberg cost into the model and show that it strengthens the selection effect, raising the productivity cutoff for exporting and improving the fit to observed patterns of firm participation and the distribution of export sales. In a counterfactual exercise with a 25% increase in U.S. tariffs, the model with heterogeneous trade costs predicts smaller declines in aggregate exports and in the fraction of exporters than a benchmark with constant iceberg costs, but larger welfare losses, as trade becomes more concentrated in a small set of high markup firms. These results suggest that ignoring firm level heterogeneity in transportation costs can bias quantitative assessments of trade policy.