Gabriel Devoto
Economist, International Monetary Fund
I am an Economist in the Systemic Issues Division of the Research Department at the International Monetary Fund.
I received my Ph.D. in Economics from the University of Minnesota in 2025.
My research focuses on macroeconomics, monetary economics, and international economics.
Working Papers
Aggregate Capital and Informality in High Inflation Economies New draft
Abstract
Countries with higher long-run inflation have larger informal sectors and shallower credit markets, and informality fell, with a lag of several years, after countries adopted inflation targeting. Models in which inflation is a tax on cash predict a smaller informal sector, because informal transactions are cash-intensive. I keep that mechanism and add a second channel, through household saving and the cost of capital, that moves activity toward the informal sector. The inflation tax falls on labor income and on cash that households set aside in advance, and its lump-sum rebate gives savers back less than they pay, so deposits fall and the cost of capital rises. Formal firms use capital intensively and finance payroll in advance, so they contract relative to informal firms. In a tractable economy I derive conditions under which this channel dominates the cash channel. In a calibrated heterogeneous-agent economy, raising annual inflation from 0% to 30% increases the informal share of output from 33% to 37%, about half the cross-country gradient conditional on income. When seigniorage finances government purchases, steady-state welfare falls with inflation at every rate, and the poorest households lose more than the richest.
Foreign Exchange Interventions with Noisy Traders
Abstract
This paper focuses on a Central Bank that seeks to profit from trading against irrational noisy traders but cannot directly observe their positions as they blend in with rational traders that are going against the noise themselves. The optimal strategy for the Central Bank is to trade against the remaining noise partially, but this results in an inefficiently small position size. With complete information, targeting the actual noise is optimal for higher expected profits. If the Central Bank had a prior on the net open position limit of the rational traders, it would target more than the remaining observable noise. I prove that the Central Bank can learn to differentiate actual noise from rational traders by fixing the prior for many periods, computing the sample variance of the observable noise, and comparing it with the actual noise variance. Finally, if rational traders have better information than the Central Bank about the future real exchange rate, intervening in the market may result in negative expected profits, so total inaction may be recommendable.
Why Don’t Firms Export More in Argentina?
Abstract
I document that the increase in prices and not in quantities are driving the rise in the value of exports of goods in Argentina in this century. I also show the country’s poor performance in capital formation, the low value of its market capitalization, and the tendency of consumers to save and firms to borrow in foreign currency. These three forces could help explain why Argentina is not exporting more. To understand the mechanisms, I build a model in which financial constraints and external debt will keep the economy closer relative to the same economy unconstrained. Moreover, this constrained economy allows for multiple equilibria, which could open room for optimal policy intervention. The critical channel driving the results is the low capital creation arising from high real exchange rates and the balance-sheet effect, affecting future consumers’ wages through a decrease in the installed capital and its price, which forces the economy to appreciate in the future to compensate for that drop in income and keep the balance of payments in equilibrium. An economy “trapped” in a bad pace will initially export more due to high real exchange rates. Still, it will eventually be forced out of the international markets due to insufficient capital stock.