"In the Quest of Macroprudential Policy Tools", Mimeo, Banco de México, March 2011.

"Explaining Taxes at the Upper Tail of the Income Distribution: The Role of Utility Interdependence", Working Paper 2009-16, Banco de México.

Optimal tax theory has difficulty rationalizing high marginal tax rates at the upper end of the labor income distribution. In this paper, I construct a model of optimal income taxation in which agents' preferences are interdependent. I derive a simple expression for optimal taxes that accommodates consumption externalities within Mirrlees (1971) framework. Using this expression, I conduct a *positive *analysis of taxation: assuming that observed taxes are optimal, I derive *analytic* expressions for i) a parameter that measures the degree of agents' utility interdependence and ii) a function that quantifies the consumption externality agents of different income impose to society. Using these expressions, I rationalize income taxes in the United States and the United Kingdom for the 1995-2004 period. I show that only a *moderate* amount of utility interdependence is sufficient for this. My estimations indicate that the progressivity of tax schedules may be driven by corrective considerations.

"Optimal Linear Taxation of Positional Goods", Mimeo, University of Minnesota.

In this article I extend the Mirrlees (1971) framework to incorporate two types of goods: non-positional (such as necessities) and positional goods (such as luxuries). I conduct a normative analysis of taxation under the presence of consumption goods whose valuation depends on the amount that other agents consume. Optimality in this environment calls for a non-linear luxury tax combined with a marginal income tax with standard Mirrleesian properties. Due to practical considerations, however, I restrict the tax correcting positional externalities to be linear. Under this additional constraint, individuals at the high end of the income distribution experience gains since for them a flat tax effectively reduces the after tax price of luxuries, thus higher consumption occurs. On the other hand, individuals at the bottom of the distribution end up being worse off since the introduction of a linear tax increases the after tax price of luxuries, thus individuals at low income level consume even less luxuries. My numerical calculations indicate that the aggregate welfare losses due to linear are almost negligible.**Work in Progress**

"Imported Intermediate Goods, Foreign Currency Working Capital Constraints and International Business Cycles".

"Optimal IncomeTaxation under Endogenously Segmented Consumption Markets".