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Caballero, Ricardo J.

Overview
Works: 203 works in 1,042 publications in 1 language and 5,921 library holdings
Genres: Case studies 
Roles: Author
Classifications: HB1, 339
Publication Timeline
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Publications about Ricardo J Caballero
Publications by Ricardo J Caballero
Most widely held works by Ricardo J Caballero
Specificity and the macroeconomics of restructuring by Ricardo J Caballero( Book )
12 editions published in 2007 in English and held by 282 libraries worldwide
A proposal that the notion of specificity - the idea that factors of production are not interchangeable - can provide a unified framework to analyze and understand a wide variety of macroeconomic phenomena stemming from the transactional environment and microeconomic restructuring. The core mechanism that drives economic growth in modern market economies is massive microeconomic restructuring and factor reallocation - the Schumpeterian "creative destruction" by which new technologies replace the old. At the microeconomic level, restructuring is characterized by countless decisions to create and destroy production arrangements. The efficiency of these decisions depends in large part on the existence of sound institutions that provide a proper transactional environment. In this groundbreaking book, Ricardo Caballero proposes a unified framework to analyze and understand a widevariety of macroeconomic phenomena stemming from limitations, especially institutional, that hinder these adjustments. Caballero argues that macroeconomic models need to be made more "structural" in a precise sense and can not be maintained on the assumption that decisions are fully flexible. What is needed, he proposes, is the notion of specificity - the idea that factors of production are not freely interchangeable. Many of the major macroeconomic developments of recent decades, he argues, fit naturally into this perspective, including the transition problems of Eastern Europe, the heavy weight of labor regulations in Western Europe, the emerging market crises of the 1990s, the prolonged expansion of the U.S. economy, and Japan's stagnation following the collapse of its real estate bubble
Emerging market crises : an asset markets perspective by Ricardo J Caballero( Book )
25 editions published between 1998 and 1999 in English and held by 105 libraries worldwide
Annotation
Speculative growth by Ricardo J Caballero( Book )
23 editions published between 2002 and 2004 in English and held by 89 libraries worldwide
We propose a framework for understanding recurrent historical episodes of vigorous economic expansion accompanied by extreme asset valuations, as exhibited by the U.S. in the 1990s. We interpret this phenomenon as a high-valuation equilibrium with a low effective cost of capital based on optimism about the future availability of funds for investment. The key to the sustainability of such an equilibrium is feedback from increased growth to an increase in the supply of effective funding. We show that such feedback arises naturally when an expansion comes with technological progress in the capital producing sector, when fiscal rules generate sustained fiscal surpluses, when the rest of the world has lower expansion potential, and when financial constraints are relaxed by the expansion itself. Arguably, these ingredients were all simultaneously present in the U.S. during the 1990s. We also show that such expansions can be welfare improving but they can crash. The latter is more likely if bubbles develop along the expansionary path. These (rational) bubbles can emerge even when the interest rate exceeds the rate of growth of the economy. Keywords: Bubbles, investment, cost of capital, growth-saving feedback, multiple equilibria, dynamic efficiency and inefficiency, new economy, spillovers, fiscal and current account surpluses. JEL Classifications: D0, D9, E2, E3, G1, H3
The cost of recessions revisited : a reverse-liquidationist view by Ricardo J Caballero( Book )
19 editions published between 1999 and 2000 in English and held by 74 libraries worldwide
The observation that liquidations are concentrated in recessions has long been the subject of controversy. One view holds that liquidations are beneficial in that they result in increased restructuring. Another view holds that liquidations are privately inefficient and essentially wasteful. This paper proposes an alternative perspective. Based on a combination of theory and empirical evidence on gross job flows and on financial and labor market rents, we find that, cumulatively, recessions result in reduced restructuring, and that this is likely to be socially costly once we consider inefficiencies on both the creation and destruction margins
Improper churn : social costs and macroeconomic consequences by Ricardo J Caballero( Book )
13 editions published in 1998 in English and held by 69 libraries worldwide
This paper assembles elements that are essential in forming an integral picture of the way a churning' economy functions and of the disruptions caused by transactional difficulties in labor and financial markets. We couch our analysis in a stochastic equilibrium model anchored with US evidence on gross factor flows and on rents in worker and firm income. We develop a social accounting framework to measure the costs of transactional impediments. We calculate the average social loss associated with structural unemployment and low productivity -- due to technological sclerosis' and a scrambling' of productivity rankings in entry and exit decisions. We also estimate the loss from a recession. An additional forty percent to the traditional unemployment cost is due to reduced productivity and is determined by the recession's cumulative effect on the economy's churn rate. Although a recessionary shock increases the economy's turbulence' at impact, semi-structural VAR evidence from US manufacturing indicates that, cumulatively, it results in a chill' -- which is costly in an economy that suffers from sclerosis
Nonlinear aggregate investment dynamics : theory and evidence by Ricardo J Caballero( Book )
12 editions published in 1998 in English and held by 69 libraries worldwide
In this paper we derive a model of aggregate investment that builds from the lumpy microeconomic behavior of firms facing stochastic fixed adjustment costs. Instead of the standard sharp (S, s) bands, firms' adjustment policies take the form of a probability of adjustment (adjustment hazard) that responds smoothly to changes in firms' capacity gap. The model has appealing aggregation properties, and yields nonlinear aggregate time series processes. The passivity of normal times is, occasionally, more than offset by the brisk response to large accumulated shocks. Using within and out-of-sample criteria, we find that the model performs substantially better than the standard linear models of investment for postwar sectoral U.S. manufacturing equipment and structures investment data
The macroeconomics of specificity by Ricardo J Caballero( Book )
13 editions published between 1995 and 1996 in English and held by 67 libraries worldwide
Specific quasi-rents build up in a wide variety of economic relationships, and are exposed to opportunism unless fully protected by contract. The recognition that such contracts are often incomplete has yielded major insights into the organization of microeconomic exchange. Rent appropriation, we argue, also has important macroeconomic implications. Resources are underutilized, factor markets are segmented, production suffers from technological with creation, recessions are excessively sharp, and expansions run into bottlenecks. While, depending on the nature of the shock, expansions may require reinforcement or stabilization, recessions should always be softened. In the long run, institutions, such as those governing capital-labor relations, may evolve to alleviate the problem by balancing appropriation. Technology choice will also be affected, with the appropriated factor partially appropriation as manifested in the role capital-labor substitution played in the rise of European unemployment
Jobless growth : appropriability, factor substitution, and unemployment by Ricardo J Caballero( Book )
14 editions published in 1997 in English and held by 62 libraries worldwide
A central determinant of the political economy of capital-labor relations is the appropriability of specific quasi-rents. " This paper is concerned with the general-equilibrium interaction of appropriability and characteristics of technology namely, the embodiment of technology in capital and capital-labor substitutability in the technological menu. Technological embodiment means that the supply of capital is effectively much less elastic in the short than in the long run, and is therefore more exposed to appropriability; technology choice implies that an attempt at appropriating capital will induce a substitution away from labor in the long run, and constitutes a mechanism to thwart appropriation. Shifts in European labor relations in the last three decades offer a good laboratory to explore the empirical relevance of those mechanisms. The evolution of the labor share, the profit rate, the capital/output ratio, and unemployment which we examine more particularly in the case of France appears highly supportive
Macroeconomic volatility in Latin America : a view and three case studies by Ricardo J Caballero( Book )
16 editions published in 2000 in English and held by 61 libraries worldwide
After decades of trial, error, and occasional regress the pieces of a successful Latin American economic model can be seen scattered among the leading economies of the region. The most traditional macroeconomic maladies of the emerging world - such as chronic fiscal imbalances and monetary gimmicks are gradually being left behind. Many of these economies have made significant progress in their regulatory and supervisory frameworks and, at times, have been leaders beyond Latin American boundaries in allowing private sector co-participation in a wide array of ex-public sector activities. Despite these significant efforts, several structural sources of volatility remain, and new ones have emerged as a result of the new and otherwise better economic environment. In this paper I review these sources through the recent experiences of Argentina, Chile and Mexico
On the timing and efficiency of creative destruction by Ricardo J Caballero( Book )
12 editions published in 1994 in English and held by 61 libraries worldwide
This paper analyzes the timing, pace and efficiency of the on- going job reallocation that results from product and process innovation. There are strong reasons why an efficient economy ought to concentrate both job creation and destruction during cyclical downturns, when the opportunity cost of reallocation is lowest. Malfunctioning labor markets can disrupt this synchronized pattern and decouple creation and destruction. Moreover, irrespective of whether workers are too strong or too weak, labor market inefficiencies generally lead to technological 'sclerosis, ' characterized by excessively slow renovation. Government incentives to production may alleviate high unemployment in this economy, but at the cost of exacerbating sclerosis. Creation incentives, on the contrary, increase the pace of reallocation. We show how an optimal combination of both types of policies can restore economic efficiency
Explaining investment dynamics in U.S. manufacturing : a generalized (S, s) approach by Ricardo J Caballero( Book )
15 editions published in 1994 in English and held by 61 libraries worldwide
In this paper we derive a model of aggregate investment that builds from the lumpy microeconomic behavior of firms facing stochastic fixed adjustment costs. Instead of the standard (S, s) bands, firms' optimal adjustment policies are probabilistic, with a probability of adjusting (adjustment hazard) that grows smoothly with firms' disequilibria. Depending upon the specification of the distribution of fixed adjustment costs, the adjustment hazards approach encompasses models ranging from the very non-linear (S, s) model to the linear partial adjustment model. Except for the latter extreme, the processes for aggregate investment obtained from adding up the actions of firms subject to aggregate and idiosyncratic shocks, is highly non-linear. Estimating the aggregate model by maximum likelihood, we find clear evidence supporting non-linear models over linear ones for postwar sectoral U.S. manufacturing equipment and structures investment. For a given sequence of aggregate shocks, the nonlinear model estimated generates brisker expansions and - to a lesser extent - sharper contractions than its linear counterpart. These features fit well the observed positive skewness and large kurtosis of U.S. manufacturing sectoral investment/capital ratios
Aggregate investment by Ricardo J Caballero( Book )
13 editions published in 1997 in English and held by 60 libraries worldwide
The 90s have witnessed a revival in economists' interest and hope of explaining" aggregate and microeconomic investment behavior. New theories, better econometric" procedures, and more detailed panel data sets are behind this movement. Much of the progress" has occurred at the level of microeconomic theories and evidence; however aggregation and general equilibrium aspects of the investment problem also has been significant. " The concept of sunk costs is at the center of modern theories. The implications of these costs for" investment go well beyond the neoclassical response to the irreversible-technological friction" they represent, for they can also lead to first order inefficiencies when interacting with" informational and contractual problems
Fixed costs : the demise of marginal q by Ricardo J Caballero( Book )
14 editions published in 1996 in English and held by 58 libraries worldwide
The standard version of q theory, in which investment is positively related to marginal q, breaks down in the presence of fixed costs of adjustment. With fixed costs, investment is a non-monotonic function of q. Therefore its inverse, which is the traditional investment function, does not exist. Depending upon auxiliary assumptions, the correlation between investment and marginal q can be either positive or negative. Given certain homogeneity assumptions, a version of the theory based on average q still holds, although under the same assumptions profits and sales perform as well as average q. More generally, q is no longer a sufficient statistic
Creative destruction and development : institutions, crises, and restructuring by Ricardo J Caballero( Book )
16 editions published in 2000 in English and held by 58 libraries worldwide
There is increasing empirical evidence that creative destruction, driven by experimentation and the adoption of new products and processes when investment is sunk, is a core mechanism of development. Obstacles to this process are likely to be obstacles to the progress in standards of living. Generically, underdeveloped and politicized institutions are a major impediment to a well-functioning creative destruction process, and result in sluggish creation, technological sclerosis, ' and spurious reallocation. Those ills reflect the macroeconomic consequences of contracting failures in the presence of sunk investments. Recurrent crises are another major obstacle to creative destruction. The common inference that increased liquidations during crises result in increased restructuring is unwarranted. Indications are, to the contrary, that crises freeze the restructuring process and that this is associated with the tight financial-market conditions that follow. This productivity cost of recessions adds to the traditional costs of resource under-utilization
Dollarization of liabilities : underinsurance and domestic financial underdevelopment by Ricardo J Caballero( Book )
14 editions published in 2000 in English and held by 58 libraries worldwide
Abstract: While there is still much disagreement on the causes underlying recent emerging markets' crises, one factor that most observers have agreed upon is that contracting dollar' (foreign currency) denominated external debt as opposed to domestic currency debt created balance sheet mismatches that led to bankruptcies and dislocations that amplified downturns. Much of the analysis of the currency-balance sheet channel' hinges on the assumption that companies contract dollar denominated debt. Yet there has been little systematic inquiry into why companies must or choose to take on dollar debt. In this paper we cast the problem as one of microeconomic underinsurance with respect to country-wide aggregate shocks. Denominating external debt in domestic currency is equivalent to contracting the same amount of dollar-debt, complemented with insurance against shocks that depreciate the equilibrium exchange rate. The presence of country-level international financial constraints justify the purchase of such insurance even if all agents are risk neutral. However, if domestic financial constraints also exist, domestics will undervalue the social contribution of contracting insurance against country-wide shocks. Foreign lenders will reinforce the underinsurance problem by reducing their participation in domestic financial markets
International liquidity management : sterilization policy in illiquid financial markets by Ricardo J Caballero( Book )
15 editions published in 2000 in English and held by 58 libraries worldwide
During the booms that precede crises in emerging economies, policy makers often struggle to limit capital flows and their expansionary consequences. The main policy tool for this task is sterilization - essentially a swap of international reserves for public bonds. However, there is an extensive debate on the effectiveness of this policy, with many arguing that it may be counterproductive once the (over-) reaction of the private sector is considered. But what forces account for the private sector's reaction remain largely unexplained. In this paper we provide a model to discuss these issues. We emphasize the international liquidity management aspect of sterilization over the traditional monetary one, a re-focus that seems warranted when the main concern is external crisis prevention. We first demonstrate that policies to smooth expansion in anticipation of downturns can be Pareto improving in economies where domestic financial markets are underdeveloped. We then discuss the implementation and effectiveness of this policy via sterilization. The greatest risk of policy arises in situations where policy is most needed - that is , when financial markets are illiquid. Our mechanism is akin to the implicit bailout' problem, although the central bank acts non-selectively and only intervenes through open markets in our model. Illiquidity replaces corruption and ineptitude. In addition to an appreciation of the currency and the emergence of a quasi-fiscal deficit, the private sector's reaction to sterilization may lead to an expansion rather than the desired contraction in aggregate demand or nontradeables investment and to a bias toward short term capital inflows. The main insights extend to international liquidity management issues more generally
Aggregate employment dynamics : building from microeconomic evidence by Ricardo J Caballero( Book )
12 editions published between 1994 and 1995 in English and held by 57 libraries worldwide
Abstract: This paper studies quarterly employment flows of approximately 10,000 large U.S. manufacturing establishments during 1972:1-1980:4. After estimating the extent of short run microeconomic substitution between employment and hours per worker (hours-week), we construct measures of the path of the deviation between actual and desired employment based on the observed behavior of establishments' hours-week. These deviations are then used as the state variables upon which units decide their employment adjustments (microeconomic policy). Using this framework we find that: (i) Microeconomic employment adjustment policies are non-linear, with firms adjusting to large deviations proportionally more than to small ones; (ii) Employment adjustments are often either large or nil, suggesting the presence of non-convexities in the adjustment cost technologies; (iii) 60 to 90 % of aggregate employment fluctuations is due to changes in the cross sectional distribution of employment deviations, while the rest is due to microeconomic policy changes; (iv) Most of the net aggregate employment fluctuations from changes in the cross sectional distribution are accounted for by aggregate shocks, despite significant fluctuations in the distribution of idiosyncratic shocks and the marked countercyclical nature of their second moment(i.e. reallocation shocks) (v) Similarly, most of the net aggregate employment fluctuations due to microeconomic policy changes are accounted for by aggregate shocks; (vi) Aggregate shocks are also the dominant source of job destruction, but account for less than half of fluctuations in job creation; (vii) A simple parametric version of the aggregate model suggested by the microeconomic nonlinearities shown above has a mean square error 50% lower than its linear counterpart's
Fear of sudden stops : lessons from Australia and Chile by Ricardo J Caballero( Book )
17 editions published between 2004 and 2005 in English and held by 56 libraries worldwide
Latin American economies are exposed to substantial external vulnerability. Domestic imbalances and terms of trade shocks are often exacerbated by sudden stops of capital inflow. In this paper we explore ways of overcoming external vulnerability, drawing lessons from a detailed comparison of the response of Chile and Australia to recent external shocks and from Australia's historical experience. We argue that in order to understand sudden stops and the mechanisms to smooth them, it is useful to identify and then distinguish between two inter-related dimensions of investors' confidence: country-trust and currency-trust. Lack of country-trust is a more fundamental and serious problem behind sudden stops. But lack of currency-trust may both be a source of country-trust problems and weaken a country's ability to deal with sudden stops. We discuss steps to improve along these two dimensions of investors' confidence in the medium run, and policies to reduce the impact of country-trust and currency-trust weaknesses in the short run
International and domestic collateral constraints in a model of emerging market crises by Ricardo J Caballero( Book )
14 editions published in 2000 in English and held by 55 libraries worldwide
We build a model of emerging markets crises which features two types of collateral constraints. Firms in a domestic economy have limited borrowing capacity from international investors. They also have limited borrowing capacity with respect to each other. We study how the presence of and changes in these collateral constraints affect financial and real variables. A binding international constraint in the aggregate leads to a sharp rise in interest rates and fire sales of domestic assets, while limited domestic collateral can lead to wasted international collateral. These two collateral constraints can interact in important ways. The first is disintermediation: a fire sale of domestic assets causes banks to fail in their function of reallocating resources across the economy leading to wasted international collateral. The second is a dynamic effect. We show that firms in an economy with limited domestic collateral and a binding international collateral constraint will not adequately precaution against adverse shocks, increasing the severity of these shocks. Our approach is distinctive in that, while much of the literature on the role of financial constraints in macroeconomics draws their insights within either of these collateral deficiencies, we argue that their static and dynamic interactions have important consequences for emerging markets' performance
Smoothing sudden stops by Ricardo J Caballero( Book )
14 editions published in 2001 in English and held by 50 libraries worldwide
Emerging economies are exposed to severe and sudden shortages of international financial resources. Yet domestic agents seem not to undertake enough precautions against these sudden stops. Following our previous work, we highlight in this paper the central role played by limited domestic development in ex-ante (insurance) and ex-post (spot) financial markets in generating this collective undervaluation of external resources and insurance. Within this structure, this paper studies several canonical policies to counteract the external underinsurance. We do this by first solving for the optimal mechanism given the constraints imposed by limited domestic financial development, and then considering the main - in terms of the model and practical relevance - implementations of this mechanism. Keywords: External Shocks, domestic and international collateral, underinsurance, credit lines, liquidity requirements, asset market intervention
 
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Alternative Names
Caballero G, Ricardo
Caballero G., Ricardo 1959-
Caballero G., Ricardo (Caballero Gibbons)
Caballero G., Ricardo J. 1959-
Caballero Gibbons, Ricardo
Caballero, Ricardo 1959-
Caballero, Ricardo Jorge 1959-
Gibbons, Ricardo Caballero
Ricardo J. Caballero Chilean macroeconomist
Ricardo J. Caballero chilensk ekonom
Ricardo J. Caballero chilensk økonom
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English (303)
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