Able to earn a scholarship because of her high scholastic marks, Castedo enrolled at the University of California at Los Angeles, graduating with a master's degree in Spanish-American literature in 1968. She was accepted as a teacher's assistant in the literature department at Harvard University and granted a scholarship to study for her PhD. While there, she met A. Denny Ellerman, a graduate student in the Economics Department, who would later become an economist at MIT. They married in Aix-en-Provence in 1973. The family moved to Vietnam, where Ellerman served as the Minister Counselor of Economic Affairs at the American Embassy. Castedo and her children were evacuated days before the Fall of Saigon and made their way to Hong Kong. While living in various Asian countries she continued to work on her doctoral thesis and earned her PhD from Harvard in 1976.