Abstract

Firms are an important part of the tax base. I ask how corporate currency mismatch, foreign-currency debt net of foreign assets, amplifies the sovereign spread’s response to the exchange rate. I construct a novel dataset of about 42,000 listed non-financial firms in 57 countries. In emerging markets, the sovereign CDS spread rises 0.16 percentage points more in a 10 percent depreciation per 10 percentage points of mismatch. I develop a sovereign default model, calibrated to Indonesia, where firms deduct exchange-rate losses from taxable income. In a depreciation, mismatched firms pay less tax and invest less, raising the spread. Their foreign-currency debt accounts for almost half of the spread’s response, 44 percent of that part through the corporate income tax. Excluding exchange-rate gains and losses from taxable income lowers this response. Firm owners gain 0.26 percent of consumption. Workers are unaffected at Indonesia’s tax rates but would lose at higher rates.

Presented at: Society for Advancements in Economic Theory (Rio de Janeiro, 2026) · EGSC at Washington University in St. Louis (St. Louis, 2026) · Universidad del Pacífico Seminario DAE-CIUP (Lima, 2026) · UMN–UW Workshop (Madison, 2026) · HHEI Alumni Conference (Minneapolis, 2026) · CEPR International Macroeconomics and Finance Programme Meeting Poster Session (Gerzensee, 2026 - upcoming) 

Abstract

Emerging-market sovereigns are not fully excluded from private credit during default, contrary to what the literature assumes. Using World Bank data on 66 default episodes, I show that private creditors keep lending, although about two-thirds less than in normal times. Most of it comes early, and the first half of an episode receives roughly 3.7 times as much as the second. This access can help the government smooth its expenditure through stressful times (an insurance effect). But it can also weaken the sovereign’s commitment to repay and raise spreads in normal times (a commitment effect). To weigh the two, I develop a model with two sequentially accessed private markets, calibrated to Colombia. Removing the second market makes the sovereign better off by 0.28% in consumption-equivalent terms. The commitment effect dominates unless re-entry to the regular market is fast enough. The equilibrium can be read as a coordination failure among private lenders that hurts the borrower itself.

Presented at: UMN-UW Workshop (Minneapolis, 2024) · UMN Sandor Poster Conference (Minneapolis, 2024)

Abstract

We examine market entry and post-entry debt dynamics in Frontier Economies by grouping countries based on durability of market access using a two-step framework combining first Eurobond issuance with the reliance on private external creditors, validated through an unsupervised K-mean clustering. A discrete-time event LOGIT model finds that favorable global liquidity conditions and investor appetite open issuance windows for countries, but domestic pull factors—income, institutions, growth, and reserve buffers—ultimately determine success of market entry. Post-entry, Frontier Economies shift rapidly toward market borrowing, with looser fiscal stance as new financing source is unlocked. Along increased exposure to rollover and global financial cycle risks, debt decomposition exercise shows a worsening interest–growth differential and rising debt, driven mainly by primary deficits and higher interest burdens. Results underscore the need for credible medium-term fiscal frameworks, stronger debt management, and reserve buffers to manage the transition to market financing.

Presented at: Sovereign Debt Workshop at International Monetary Fund (Washington, D.C. 2026)

Abstract

Homeownership can insure households against rental-rate risk: buying fixes the price of housing services that renters repeatedly face. But rental risk also creates valuable rental positions: a renter with a favorable rent draw gives up that claim by moving or buying. We ask which force dominates: the insurance value of owning or the lock-in value of a favorable rental draw. To measure rental-rate risk, we combine PSID data with long external rent indexes, overcoming a short panel’s inability to distinguish persistent rent shocks from permanent heterogeneity. We find three distinct components: a highly persistent market component, persistent unit-specific risk within a tenancy, and substantial re-draw risk when households enter a new tenancy. We estimate a life-cycle model of tenure choice and find that removing rental-rate risk raises homeownership by 3.29 pp. Rental-rate risk raises ownership through insurance but lowers it through lock-in to favorable rent draws; the insurance channel raises ownership by 0.36 pp, but lock-in dominates. Renters with unfavorable rent draws buy at nearly twice the rate of renters with favorable draws, and the welfare effects of rental risk are strongly redistributive, with losses concentrated among poorer households. A policy that protects renters from losing favorable rent draws when they move releases cheap-rent lock-in and raises homeownership, making tenant protection and homeownership complementary forms of insurance against rental-rate risk.

Presented at: Society for Advancements in Economic Theory (Rio de Janeiro, 2026) · Universidad del Pacífico Seminario DAE-CIUP (Lima, 2026)

Abstract

China’s 2017 National Sword cut allowable contamination in imported recyclables to 0.5%. We study the U.S. recycling sector’s response in trade, processing, dumping, and prices. We build a two-country open circular-economy model where households generate waste, and waste managers either recycle or dump domestic and imported waste to supply a recycled input used with labor and capital. Calibrated to U.S. plastic-waste data, the model quantifies changes in recycling rates, trade volumes, and allocations under alternative policies.

Presented at: UMN-UW Workshop (Minneapolis, 2026)