Ricardo Caballero

Caballero has argued that worldwide demand for safe financial assets such as U.S. Treasury securities exceeds the available supply, driven by the growth of emerging-market wealth, institutional investor mandates, and regulatory requirements. This structural mismatch helps explain persistently low real interest rates, global capital imbalances, and vulnerabilities that contributed to the 2008 financial crisis.

Caballero is the Ford International Professor of Economics at the Massachusetts Institute of Technology, where he has been on the faculty since the 1990s. He has served as head of MIT's economics department and is a research associate at the National Bureau of Economic Research.

Caballero developed the concept of complexity traps to describe situations where the opacity and interconnected complexity of modern financial instruments prevent investors from valuing assets during a panic, causing markets to freeze entirely. This framework was used to analyze how apparently localized losses in subprime mortgages escalated into a global financial crisis in 2008.

Caballero has studied how sudden reversals of capital inflows into emerging markets can trigger devastating financial crises, particularly when a country's financial system lacks the capacity to provide adequate safe assets domestically. His work on these 'sudden stop' mechanisms has influenced policy debates at the IMF and in emerging-market central banks.