By considering the construction of the Interstate Highway System, this paper asks how big, if any, are returns to constructing new highways? Since infrastructure spending is greatly anticipated I propose using news to identify the timing of shocks and construct a measure of news-shocks that considers revisions in the expected present discounted value of future interstate spending. I employ my news-shock instrument in an IV local projection framework, as in Ramey \& Zubairy (2018), and estimate a relative multiplier of 1.6 at the 15 year horizon. I then extend my specification to allow for heterogeneous multipliers and spillover effects. Finally, using the neoclassical model in a multi-region setting I study the channels through which highway spending impacts the economy. Both empirical and theoretical results suggest that in the case of highway spending the relative multiplier is a lower bound of the aggregate multiplier.
This paper studies how CDS spreads react to changes in sovereign credit ratings. Since countries with increasing macroeconomic perspectives should show both a decline in their CDS spread and an increase in their credit rating, even if a credit change is not causal we will still observe correlation between these variables. To tackle this endogeneity problem I use the synthetic control method and identify treatment effects on 55 different sovereign credit ratings changes that occurred between 2008 and 2016. The results suggest that a credit upgrade decreases the CDS spread in the first 5 days by about 1 basis points. In contrast, a credit downgrade increases the CDS spread in the rst 5 days by about 5 basis points. For both upgrades and downgrades, the possibility that this effect is not temporary can’t be rejected.
This paper studies the relationship between financial sector size and macroeconomic volatility. First, we develop a theoretical model based on Bacchetta and Caminal (2000) where we make the moral hazard problem a function of financial sector size and quality. Second, using a panel dataset consisting of 103 countries from 1981 to 2010, we look for an empirical relationship between the size of the financial sector and volatility of economic growth. We differentiate countries with respect to the quality of their financial sector. The results suggest a hump-shaped relationship for countries with high-quality financial sectors, suggesting that sufficiently large financial sectors offer diversification opportunities that outweigh the stability risk inherently attached to financial development. We estimate that growth volatility reaches a maximum when private credit over GDP is between 125 percent and 135 percent. In contrast, in countries with low-quality financial sectors no significant relationship is found.
This research studies the impact of the Popular Health Insurance, a Mexican health insurance program, on the health outcomes and health related expenditures of the Mexican families. Using Generalized Least Squares on panel data and Probit models on a cross sectional national health survey, I was able to find that the Popular Health Insurance has been able to: a) increase the use of medical services; b) decrease the morbidity of preventable diseases; c) reduce the diabetes mortality rate (currently the leading cause of death in Mexico) and; d) diminish the probability the poorest families have of incurring in catastrophic and impoverishing health expenses.