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Caballero, Ricardo J.

Works: 206 works in 1,110 publications in 1 language and 6,506 library holdings
Genres: Case studies 
Roles: Author
Classifications: HB1, 339
Publication Timeline
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 )
16 editions published in 2007 in English and held by 294 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 )
29 editions published between 1998 and 1999 in English and Undetermined and held by 116 libraries worldwide
Speculative growth by Ricardo J Caballero( Book )
17 editions published between 2002 and 2004 in English and held by 95 libraries worldwide
We propose a framework for understanding recurrent historical episodes of vigorous economic expansion accompanied by extreme asset valuations, as exhibited by Japan in the 1980s and 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 funding. We show that such feedback arises naturally when the expansion is concentrated in a "new economy" sector and when it is supported by sustained fiscal surpluses - both of which would constitute an integral part, as cause and consequence, of a "speculative growth" equilibrium. The high-valuation equilibrium we analyze may take the form of a stock market bubble. In contrast to classic bubbles on non-productive assets, the bubbles in our model encourage real investment, boost long-run savings, and may appear in dynamically efficient economies. Keywords: Bubbles, Investment, Cost of Capital, Growth-saving Feedback, Multiple Equilibria, Dynamic Efficiency and Inefficiency, New Economy, Spillovers, Fiscal and Current Account Surpluses. JEL Classification: D0, D9, E2, E3, G1, H3
Effective labor regulation and microeconomic flexibility by Ricardo J Caballero( Book )
23 editions published in 2004 in English and held by 93 libraries worldwide
We characterize the degree of microeconomic inflexibility in several Latin American economies and find that Brazil, Chile and Colombia are more flexible than Mexico and Venezuela. The difference in flexibility among these economies is mainly explained by the behavior of large establishments, which adjust more promptly in the more flexible economies, especially when accumulated shocks are substantial. We also study the path of flexibility in Chile and show that it declined in the aftermath of the Asian crisis. This decline can account for a substantial fraction of the large decline in TFP-growth in Chile since 1997 (from 3.1 percent per year for the preceding decade, to about 0.3 percent after that). Moreover, if it were to persist, it could permanently shave off almost half of a percent from Chile's structural rate of growth. Keywords: Microeconomic rigidities, creative-destruction, job flows, restructuring and reallocation, productivity growth. JEL Classifications: E2, J2, J6
The cost of recessions revisited : a reverse-liquidationist view by Ricardo J Caballero( Book )
22 editions published between 1999 and 2001 in English and held by 88 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
Nonlinear aggregate investment dynamics : theory and evidence by Ricardo J Caballero( Book )
13 editions published in 1998 in English and held by 77 libraries worldwide
Abstract: 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
Improper churn : social costs and macroeconomic consequences by Ricardo J Caballero( Book )
15 editions published in 1998 in English and held by 77 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
The macroeconomics of specificity by Ricardo J Caballero( Book )
15 editions published between 1995 and 1996 in English and held by 75 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
An equilibrium model of "global imbalances" and low interest rates by Ricardo J Caballero( Book )
24 editions published between 2005 and 2006 in English and held by 72 libraries worldwide
Three of the most important recent facts in global macroeconomics -- the sustained rise in the US current account deficit, the stubborn decline in long run real rates, and the rise in the share of US assets in global portfolio -- appear as anomalies from the perspective of conventional wisdom and models. Instead, in this paper we provide a model that rationalizes these facts as an equilibrium outcome of two observed forces: a) potential growth differentials among different regions of the world and, b) hetero-geneity in these regions' capacity to generate financial assets from real investments. In extensions of the basic model, we also generate exchange rate and FDI excess returns which are broadly consistent with the recent trends in these variables. More generally, the framework is flexible enough to shed light on a range of scenarios in a global equilibrium environment
Jobless growth : appropriability, factor substitution, and unemployment by Ricardo J Caballero( Book )
16 editions published in 1997 in English and held by 70 libraries worldwide
Abstract: 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
Explaining investment dynamics in U.S. manufacturing : a generalized (S, s) approach by Ricardo J Caballero( Book )
18 editions published in 1994 in English and Undetermined and held by 70 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
On the timing and efficiency of creative destruction by Ricardo J Caballero( Book )
14 editions published in 1994 in English and held by 70 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
Fixed costs : the demise of marginal q by Ricardo J Caballero( Book )
16 editions published in 1996 in English and held by 69 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
Macroeconomic volatility in Latin America : a view and three case studies by Ricardo J Caballero( Book )
18 editions published in 2000 in English and held by 69 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
Aggregate investment by Ricardo J Caballero( Book )
15 editions published in 1997 in English and held by 68 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
Dollarization of liabilities : underinsurance and domestic financial underdevelopment by Ricardo J Caballero( Book )
16 editions published in 2000 in English and held by 66 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 )
17 editions published in 2000 in English and held by 66 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 64 libraries worldwide
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
Flight to quality and collective risk management by Ricardo J Caballero( Book )
19 editions published between 2006 and 2007 in English and held by 51 libraries worldwide
We present a model of optimal intervention in a flight to quality episode. The reason for intervention stems from a collective bias in agents' expectations. Agents in the model make risk management decisions with incomplete knowledge. They understand their own shocks, but are uncertain of how correlated their shocks are with systemwide shocks, treating the latter uncertainty as Knightian. We show that when aggregate liquidity is low, an increase in uncertainty leads agents to a series of protective actions -- decreasing risk exposures, hoarding liquidity, locking-up capital -- that reflect a flight to quality. However, the conservative actions of agents leave the aggregate economy over-exposed to negative shocks. Each agent covers himself against his own worst-case scenario, but the scenario that the collective of agents are guarding against is impossible. A lender of last resort, even if less knowledgeable than private agents about individual shocks, does not suffer from this collective bias and finds that pledging intervention in extreme events is valuable. The intervention unlocks private capital markets
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Associated Subjects
Argentina Business cycles--Econometric models Business cycles--Mathematical models Capital costs Capital investments--Econometric models Capital investments--Mathematical models Capital market--Econometric models Capital movements Chile Corporate debt--Econometric models Corporations--Finance--Mathematical models Credit--Econometric models Debt equity conversion Debts, External--Econometric models Developing countries Economic development--Mathematical models Economic history Economic policy Employment (Economic theory) Equilibrium (Economics)--Econometric models Factors of production--Econometric models Financial crises--Econometric models Foreign exchange rates--Econometric models France Industrial organization (Economic theory) Industrial productivity--Econometric models Industrial relations--Econometric models Interest rates--Econometric models International liquidity Investments, Foreign--Econometric models Investments--Econometric models Job security--Law and legislation Labor demand Labor economics Labor market--Econometric models Labor supply--Effect of technological innovations on--Econometric models Latin America Liquidity (Economics)--Econometric models Manufactures Mexico Microeconomics Overhead costs--Mathematical models Recessions--Econometric models Rent (Economic theory)--Mathematical models Resource allocation--Mathematical models Structural unemployment--Econometric models Technological innovations--Economic aspects--Mathematical models Unemployment--Econometric models United States Valuation--Mathematical models
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 Caballero
Ricardo J. Caballero Chilean macroeconomist
Ricardo J. Caballero chilensk ekonom
Ricardo J. Caballero chilensk økonom
Ricardo J. Caballero econoom uit Chili
English (333)
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