Email
i.z.martinez-centeno@lse.ac.uk

Office Address
Department of Economics
London School of Economics and Political Science
Houghton Street, London WC2A 2AE

Placement Officer
Matthias Doepke

Supervisors
Ethan Ilzetzki
Benjamin Moll

References 
Matthias Doepke
Department of Economics
London School of Economics and Political Sciences
Houghton St, London WC2A 2AE
m.doepke@lse.ac.uk

Ethan Ilzetzki
Department of Economics
London School of Economics and Political Sciences
Houghton St, London WC2A 2AE
e.ilzetzki@lse.ac.uk

Benjamin Moll
Department of Economics
London School of Economics and Political Sciences
Houghton St, London WC2A 2AE
b.moll@lse.ac.uk

Ricardo Reis
Department of Economics
London School of Economics and Political Sciences
Houghton St, London WC2A 2AE
r.a.reis@lse.ac.uk

Download Isaac's c.v.

Monetary Policy Transmission and Informal Employment: Insights from Household‐Level Data.

Labor informality is a major global phenomenon, affecting over 61% of the world’s workforce. Despite its scale, the macroeconomic impact of labor informality, particularly its interaction with monetary policy, is not well understood. This paper explores the influence of labor informality on the transmission mechanisms of monetary policy, focusing on developing economies where informality dominates the labor market. Utilizing detailed household‐level data from Peru’s National Household Survey (ENAHO) spanning 2012 to 2022, a country with a significant informal sector, we examine how consumption and employment patterns of informal workers amplify the effects of monetary policy. Our findings suggest that informal workers, who often belong to hand‐to‐mouth households, have a higher marginal propensity to consume (MPC) and are more sensitive to economic fluctuations due to limited access to financial services. By incorporating these factors into a Two‐Agent New Keynesian (TANK) model, we show that monetary policy shocks have a more pronounced impact on output and inflation in economies with large informal labor markets. This study highlights the need for policymakers to account for the distinctive characteristics of informal labor markets when designing effective monetary policies. I Link to paper.

Working Papers

Complementarity and Substitution of Formal and Informal Employment During the Business Cycles, (in Spanish; MA thesis). 
This paper aims to identify to what extent the aggregate productivity shocks and the sectoral productivity shocks explain the cyclicality of formal and informal employment during the business cycles in a small open economy that has unemployment. Using a DSGE model with two sectors and search frictions the study explains the formal and informal job movements. Thus, if an aggregate productivity shock happens, informal employment is pro-cyclical (complementarity), but if a sectoral productivity shock occurs, informal employment is counter-cyclical (substitution).

The Role of Unemployment in Salary Determination: Empirical Evidence for Lima Metropolitan, (in Spanish). 
This paper presents an econometric assessment of the role of unemployment in wage determination, considering the source of employment (formal or informal). Based on dataset from the National Household Survey (ENAHO), this paper uses the methodology of Dynamic Panel Data (GMM). The results show that Lima Metropolitan has a "wage curve", and this curve is more inelastic for formal jobs compared to informal jobs which suggest the presence of stronger wage rigidities in the formal sector.

Works in Progress

Optimal Fiscal Rules, with  Klaus Schmidt-Hebbel and Raimundo Soto. 

Adoption of Institutions, with Klaus Schmidt-Hebbel.