- Ph.D., Harvard University, Economics
- M.A., University of Michigan, Applied Mathematics
- M.A., University of Puerto Rico, Mathematics
- A.B., Columbia University, Philosophy
Arturo Estrella has published extensively in various fields within economics, including macroeconomic theory, empirical macroeconomics, monetary policy, financial regulation, econometric theory, applied econometrics, and financial markets, instruments, and institutions.
“I like to look at how the financial sector interacts with the real economy. For example, interest rates and stock prices incorporate information about investor expectations of future real economic activity and inflation. Can we extract those expectations from the data and put them to use in policy analysis or investment strategy? Also, bank lending is a major driving force for real economic activity. How does this channel operate? What drives bank lending itself? How is it affected by financial regulation?”
In 1988-89, he developed (with Gikas Hardouvelis) a probit model of the probability of a future recession. Since then, the model has correctly forecasted the last three U.S. recessions in real time with a lead time of about one year and no false positives.
Professor Estrella has also written extensively about financial regulation, proposing in 1995 an innovative system for bank capital regulation that has the potential to prevent systemic problems arising from the failure of large financial institutions. From 1991 to 2001, he represented the Federal Reserve Bank of New York in international negotiations on bank regulation under the auspices of the Basel Committee on Banking Supervision.
In econometrics, Professor Estrella derived a pseudo R-squared for dichotomous dependent variable models that outperforms other alternatives, including the classic McFadden measure. The measure has become part of the standard output in many widely-used econometric packages. He has also provided exact critical and probability values for use in time-series breakpoint tests in connection with generalized method of moments estimates.
His most recently published work includes “Sovereign and Banking Sector Debt: Interconnections through Guarantees” in OECD Financial Market Trends, “Monetary Tightening Cycles and the Predictability of Economic Activity” in Economics Letters, and “The Yield Curve as a Leading Indicator: Some Practical Issues” in Current Issues in Economics and Finance.
He is currently working on a number of articles, including “Sovereign Guarantees on Private Bank Debt: Effects on Credit Ratings and Credit Default Swap Spreads” (with Sebastian Schich), “The Credit Channel: Impact and Observability in a New Keynesian Model” Presented at the 17th International Conference on Computing in Economics and Finance of the Society for Computational Economics, “Term Premiums and the Predictability of Recessions” (with Hao Wu).