Contact Information
Department of Economics
Northwestern University
2211 Campus Drive
Evanston, IL 60208
Phone: 805-952-9459
diegocid2023@u.northwestern.edu
Education
Ph.D., Economics, Northwestern University, 2024 (expected)
MA, Economics, Northwestern University, 2019
BA, Economics, Instituto Tecnológico Autónomo de México, 2016.
BSc, Actuarial Science, Instituto Tecnológico Autónomo de México, 2016.
Primary Field of Specialization
Empirical Macroeconomics
Secondary Field of Specialization
Finance
Curriculum Vitae
Job Market Paper
“Determinants of Prepayment in the Mexican Mortgage Market”
Download Job Market Paper (PDF)
This paper examines borrowers’ prepayment behavior in Mexico’s mortgage market, and its implications for monetary policy. I examine a dataset containing the universe of bank-originated mortgage loans from 2010 to 2019, showing that more than 50 percent of all 20-year fixed-rate loans are paid off in less than five years. Owners of multiple properties utilize pre-tax rental income for mortgage repayment, reducing their debt below the debt-to-income (DTI) and loan-to-value (LTV) constraints imposed by financial institutions. In this way, they can afford to borrow more for the acquisition of additional properties. Using an instrumental variable approach for exogenous changes in the monetary policy rate, I find a significant negative effect of mortgage rate changes on the mortgage prepayment probability. I construct an overlapping generations simulation model calibrated to Mexican data to show that both tax avoidance and the presence of DTI and LTV constraints are necessary to explain the mortgage prepayment and sequential property acquisition behavior observed in the data. In addition, the model suggests that this mechanism limits the impact of expansionary monetary policy: lower interest rates redirect savings of the high-income sectors toward property prepayment, rather than boosting consumption.
Fellowships, Grants & Awards
Banco de México, “Summer Research Grant”
Fulbright – García Robles, “Graduate Studies Fellowship”
Scholarship for Excellence, Instituto Tecnológico Autónomo de México
Other Research Papers
“Credit Access and Housing Quality”, with Kwok Yan Chiu and Pablo Sánchez
Download (PDF)
Would widespread credit access solve housing quality issues? Using data from Mexico, we find a huge effect of credit access – access to mortgage loans for households in the lowest income decile – is equivalent to raising their income to the middle-income decile in terms of improvement in housing quality. This correlation falls for high-income households. We present a heterogeneous agent model with a discrete housing choice and borrowing constraint to match our empirical facts. In this model, low income households are differentially affected by limited access to credit as they are more financially constrained. We use this model to study the effect of credit provision and find that housing quality can be improved by 22 percent if all households in Mexico are given access to mortgage loans.
“The Effect of the US Presidential Election and Political Uncertainty on the Mexican CDS”, with Fabrizio López-Gallo, Stefano Lord and Alberto Romero
Download (PDF)
The 2016 US presidential election campaign generated sovereign risks due to potential policy changes in commercial relationships among North American countries, uncertainty about remittances, and other aspects related to bilateral relations. In this paper, we apply the synthetic control method developed by Abadie and Gardeazabal (2003) to estimate a so-called synthetic counterfactual for the 5-year Mexican credit default swap in order to quantify the effect of the US presidential election and, in particular, the electoral rhetoric of the Republican candidate over the Mexican country risk perception. A number of robustness checks are conducted and the results suggest that this premium is positive, statistically significant, and sensitive to the election outcome, Donald Trump’s tweets, and rounds of North American Free Trade Agreement renegotiation.
Teaching
Course Evaluation (ECON 281 Intro to Applied Econometrics, Fall ’21) – Prof. Walker
Course Evaluation (ECON 311 Macroeconomics, Winter ’22) – Prof. Gordon
Course Evaluation (ECON 281 Intro to Applied Econometrics, Spring ’22) – Prof. Walker
Course Evaluation (POL 409 Economic Policy in Action, Fall ’22) – Prof. McKenzie
Course Evaluation (ECON 281 Intro to Applied Econometrics, Fall ’22) – Prof. Walker
Course Evaluation (ECON 201 Intro to Macroeconomics, Winter ’23) – Prof. Walker
References
Prof. Martin Eichenbaum (Committee Chair)
Prof. Giorgio Primiceri
Prof. Diego Känzig