Esteban Verdugo

Ph.D. Candidate, University of Michigan.

I am a Ph.D. candidate in Economics at the University of Michigan, interested in macroeconomics and international economics. Originally from Santiago, Chile, I hold a B.A. and an M.A. in Economics from Universidad de Chile.

I am on the 2025-26 economics job market.

CVEmail: everdugo@umich.edu

Job Market Paper

Saving by Consuming: The Intertemporal Behavior of Hand-to-Mouth Households

with Mathieu Pedemonte

This paper studies the forward-looking behavior of hand-to-mouth (HtM) households enabled by durable goods consumption. In a partial equilibrium model, HtM households use durables as imperfect substitutes for financial assets. Following an expectations shock, HtM households modify the composition of their consumption bundle of durables and non-durables to engage in intertemporal substitution. In contrast, financially unconstrained households rely on financial markets for consumption smoothing. We empirically test the model's predictions using a survey-based randomized controlled trial that shocks inflation expectations for HtM and non-HtM households. While both household types significantly revise their expectations, they differ in their intended reactions in consumption spending as predicted by the model, confirming that HtM households use durables as a consumption-smoothing mechanism. In a two-agent New Keynesian model, we find that durable goods reshape monetary policy transmission. While spending becomes more volatile, aggregate consumption stabilizes. The possibility of intertemporal substitution for constrained households implies that, when durability is sufficiently high, the aggregate dynamics of the heterogeneous-agent economy converge to those of the representative-agent framework.

Latest Version Slides

Publications

Aggregate Implications of Heterogeneous Inflation Expectations: The Role of Individual Experience

with Mathieu Pedemonte and Hiroshi Toma

Accepted, The Economic Journal

We explore the implications of heterogeneous, history-dependent inflation expectations in a general equilibrium setting. We propose an experience-based expectations-augmented Kalman filter to represent consumers' heterogeneous inflation expectations, where heterogeneity arises from an anchoring-to-the-past mechanism. Using survey data, we show that the model replicates US consumers' inflation expectations and their heterogeneity across cohorts. We introduce this mechanism into a New Keynesian model and find that heterogeneous expectations anchor aggregate responses to the agents' inflation history, producing sluggish expectations dynamics. Central banks should be active to prevent inflationary episodes that agents will remember far into the future.

Published Version Final WP Version Slides

Working Papers:Cleveland Fed WP 23-04 IADB WP 1699

Mentions:Cleveland Fed IADB

Working Papers

Saving by Consuming: The Intertemporal Behavior of Hand-to-Mouth Households

with Mathieu Pedemonte

Job Market Paper

This paper studies the forward-looking behavior of hand-to-mouth (HtM) households enabled by durable goods consumption. In a partial equilibrium model, HtM households use durables as imperfect substitutes for financial assets. Following an expectations shock, HtM households modify the composition of their consumption bundle of durables and non-durables to engage in intertemporal substitution. In contrast, financially unconstrained households rely on financial markets for consumption smoothing. We empirically test the model's predictions using a survey-based randomized controlled trial that shocks inflation expectations for HtM and non-HtM households. While both household types significantly revise their expectations, they differ in their intended reactions in consumption spending as predicted by the model, confirming that HtM households use durables as a consumption-smoothing mechanism. In a two-agent New Keynesian model, we find that durable goods reshape monetary policy transmission. While spending becomes more volatile, aggregate consumption stabilizes. The possibility of intertemporal substitution for constrained households implies that, when durability is sufficiently high, the aggregate dynamics of the heterogeneous-agent economy converge to those of the representative-agent framework.

Latest Version Slides

Trade Credit and Collateral Market Valuation

Using firm-level time-series data from the US, I study the relationship between firms' collateral value and their trade credit linkages. Exploiting local variations in real estate prices as shocks to the collateral value of firms holding real estate, I find that a rise in the collateral market value relative to the capital level of firms increases their share of total costs financed via trade credit. These firms also increase the share of total sales made on a trade credit basis. As a net effect, the rise in the relative valuation of their physical assets makes firms net lenders from a trade credit perspective. This result is consistent with debt-related results showing that short-term borrowings of these firms rise with the relative market value of their collateral, including short-term bank credit. These effects are stronger in firms more likely to be financially constrained. They can be interpreted as evidence of the existence of borrowing constraints associated with firms' collateral value in a trade credit context, highlighting the relevance of collateral value in easing ex-ante financing and mitigating credit market frictions.

Latest Version Slides

Work in Progress

Trade Credit and Collateral Market Valuation

Using firm-level time-series data from the US, I study the relationship between firms' collateral value and their trade credit linkages. Exploiting local variations in real estate prices as shocks to the collateral value of firms holding real estate, I find that a rise in the collateral market value relative to the capital level of firms increases their share of total costs financed via trade credit. These firms also increase the share of total sales made on a trade credit basis. As a net effect, the rise in the relative valuation of their physical assets makes firms net lenders from a trade credit perspective. This result is consistent with debt-related results showing that short-term borrowings of these firms rise with the relative market value of their collateral, including short-term bank credit. These effects are stronger in firms more likely to be financially constrained. They can be interpreted as evidence of the existence of borrowing constraints associated with firms' collateral value in a trade credit context, highlighting the relevance of collateral value in easing ex-ante financing and mitigating credit market frictions.

Latest Version Slides

Teaching

Graduate Student Instructor, University of Michigan - Ann Arbor M.I., U.S.

Ph.D. in Economics: Macroeconomic Theory
M.Sc. in Applied Economics: Quantitative Methods
Undergraduate: Principles of Macroeconomics, Intermediate Microeconomics and Macroeconomics, Behavioral Economics, and Economics of Crime.

Lecturer, Universidad Tecnica Federico Santa Maria - Santiago, Chile

Introduction to Economics

Teaching Assistant, Universidad de Chile - Santiago, Chile

Ph.D. in Economics: Development Economics
M.Sc. in Applied Economics: Macroeconomic Theory
Master of Public Policy: Urban Policy
Undergraduate: Calculus I and II, Intermediate Microeconomics, Introduction and Advanced Macroeconomics, Labor Economics, Environmental Economics, and Urban Economics.