CV - Job Market Paper  

Castells, Madalen

Contact Information

Tel. +34 93 542 1191

[email protected]


Personal Webpage


Available for interviews at

European Job Market for Economists (EEA)

Allied Social Science Associations (ASSA)




Research interests

Finance, Banking, Safe Assets.

Placement Officer

Libertad González
[email protected]


Victoria Vanasco (Advisor)
[email protected]

Vladimir Asriyan
[email protected]

Xavier Freixas
[email protected]

Jaume Ventura
[email protected]


"Private Safe-Asset Supply and Economic Instability” (Job Market Paper)
I study the macroeconomic implications of an increase in safe-asset demand by exploring the interplay between the private safe-asset supply and the quality of investments. I consider a setting in which risk-neutral bankers can (i) raise funds from households by issuing safe claims, (ii) invest the proceeds into their risky investment, and (iii) exert unobservable effort to improve the quality of this investment. Most importantly, bankers can transform risky cash flows into safe claims through diversification, i.e. by trading financial claims with other bankers. The amount of safe claims that a bank can issue depends on the level of diversification and on the exerted effort, giving raise to a natural tension: while diversification requires selling cash flows to other bankers, exerting effort requires retaining cash flows for incentive provision. I show that in this setting, an increase in the demand for safe assets depresses aggregate output and increases economic volatility. The reason being that bankers respond to the increase in demand by diversifying more cash flows at the expense of reducing effort, and therefore reducing the quality of investment. How safe assets are manufactured, i.e., the type of financial claims that bankers can trade with each other, is essential for assessing the normative properties of the decentralized equilibrium. While complete markets implement the constrained efficient allocations, market incompleteness (e.g. securitization, late-asset sales) exacerbates the negative effect of increasing safe-asset demand on economic fundamentals, calling for policy intervention.


Research Papers in Progress

“Safe Assets in the Long-run International Perspective" (with B. Richter, D. Kuvshinov, and V. Vanasco)
The paper tracks the evolution of safe assets in the global financial system, separating changes in the supply and demand for these assets. Safe assets can be supplied by the government (public supply) or by the private sector (private supply), with the private production of safe assets often being backed by public safe assets or private and risky safe assets. We highlight the key role of the financial sector on both the demand and the supply side of safe assets. This key role extends across borders, with the international financial system expanding its demand for US and Euro safe assets rapidly.

“Understanding the Relation between Safety and Liquidit"
Safety and liquidity refer to two distinct concepts that are clearly differentiated in theory but challenging to disentangle empirically. The literature often takes for granted that safe assets are liquid, and even if this premise builds on a strong empirical foundation, assuming this relation always holds ignores important financial fragilities. To understand better this relation, I use COMPUSTAT data and merge with bond level data provided by Refinitv to construct measures of default risk and liquidity at the bond level. Following the corporate bankruptcy literature, I use two measures of default risk: (i) Alltman’s Z score which is and index constructed using balance sheet data, and (ii) Merton’s probability of default, to calculate the market value of assets by viewing the observed equity price as a call option on the unobserved market value of the entire firm. Regarding the liquidity measure, I use the standard bid-ask spread. I study how the correlation between these two measures evolve over time, with economic and institutional conditions.