Roman Merga | Economics

I am an Economist at IMF's Asia and Pacific Department. I received my PhD in Economics from the University of Rochester.

My main research interests focus in International Economics, Macroeconomics, and firm heterogeneity.

University of Rochester

Principles of Economics

(Undergraduate) Summer 2020: Instructor


(Graduate) Fall 2018, 2019, 2020: Teaching Assistant

Money, Credit and Banking

(Undergraduate) Spring 2019: Teaching Assistant

Pricing Policies

(Graduate) Fall 2018, 2019: Teaching Assistant (Simon Business school)

Intermediate Macroeconomics

(Undergraduate) Spring 2018: Teaching Assistant


Working papers

International Trade, Volatility, and Income Differences

(Job Market Paper)

Developing countries trade less than rich countries. I show that this lack of involvement in trade arises because high domestic volatility discourages exporters' investments in foreign market access. At the cross-country level, I find that country's TFP volatility explains 40% of the relationship between trade and GDP per capita. Using Colombian micro-level data, I document that exporters facing higher domestic sales volatility export less. In industries with more domestic sales volatility, new exporters expand relatively less over their life cycle. This dampening of the firm-level export expansion path is more severe in products with more variable markups. Motivated by these novel firm-level findings, I develop an international trade model with new exporter dynamics and non-CES demand that can account for the novel facts at the firm and the cross-country levels. These findings suggest that trade frictions calculated using static trade models reflect the interactions of domestic volatility and exporters’ investment decisions to grow into foreign markets. Indeed my quantitative findings show that the volatility differences across countries are equivalent to a 30% higher trade cost in developing economies. These volatility differences account for 40% of the differential trade cost estimated by static models.

Real Exchange Rate Uncertainty Matters. Trade, Shipping Lags, and Default

Using a new time-varying measure of real exchange rate uncertainty, I show that there is a negative relation between real exchange rate uncertainty and international trade at the aggregate level. A one standard deviation increase in the real exchange rate uncertainty is associated with a 5% drop in total trade over GDP. Then, using Colombian firm-level data, I document 3 firm-level facts consistent with the existence of a precautionary margin in international trade. When real exchange rate uncertainty increases exporters, 1) reduce their export intensity; 2) are more likely to stop exporting and 3) less likely to start exporting to new markets. Additionally, I find that this behavior is mostly explained by those exporters paying higher interest rates and facing higher shipping lags. These results contrast with the predictions from standard sunk cost models of international trade. As a consequence, these models will under-estimate the effects that real exchange uncertainty has on international trade flows. To overcome this issue, I incorporate firm-level debt default and international shipping lags into a standard dynamic model of trade. In the new model, an increase in the real exchange rate uncertainty increases the probability for exporters to end up in a financially vulnerable situation. To hedge against this risk, exporters respond by increasing mark-ups or quitting the export market, generating a drop in aggregate exports through both the intensive and the extensive margin of trade. Once this extension is calibrated to match firm-level Colombian data, it predicts that a one standard deviation increase in the real exchange rate uncertainty generates a drop in total exports of around 6%.

Fighting Income Inequality With International Trade
(with Victor Hernandez and Nicholas Kozeniauskas)

How does international trade affect the wage distribution across workers? We use detailed employer-employee covering 1987 to 2004 to answer this question. Using a new instrumental variable approach to disentangle the effects that trade openness has over the distribution of income and wages, we document that an increase in local trade exposure reduces wage inequality. Furthermore, we show that this result is associated with changes happening at the within-industry and within-firm levels. These changes lead to increases in the relative demand for low-wage and low-skill type of worker. At the within-industry level, we show that trade openness reallocates workers towards small firms and low-skilled jobs. At the within-firm level, we find that small firms increase their labor intensity and the average amount of workers, while larger firms reduce it in response to changes in trade openness. We argue that these firm-level responses are the root of the increase in the relative demand for low-wage workers.

Selected work in progress

Pricing to Clients and the Pass-Through of Shocks
(with Armen Khederlarian)

Most of the studies on exporter's pricing behavior focus on discrimination across markets. Less attention has been paid to how firms price discriminate across their portfolio of customers. Using novel firm-to-firm transaction level data from Colombian exports, we document three facts. First, price dispersion at the seller-product level is non-negligible and a large fraction of it is accounted for by within destination variation. Second, clients with larger shares in the exporters' past revenues pay lower prices and their prices are adjusted more frequently. Third, prices paid by the largest clients are less sensitive to fluctuations in the exchange rate, especially when the currency appreciates. These results illustrate that firms actively price discriminate across their buyers and offer more favorable terms to their largest clients. We rationalize these facts with a model of heterogeneous buyers and sellers, costly search, random matching and menu costs.