Abstract. We study how firm heterogeneity and research intensity shape the investment channel of monetary policy. We exploit an unconventional monetary policy shock as a natural experiment - a drop in non-bank borrowing costs from bonds eligible under the ECB's 2016 corporate sector purchasing program (CSPP). We show that the CSPP announcement reduced the government-yield spread of eligible bonds by 13.1 bps relative to sufficiently segmented ineligible bonds. We replicate empirical findings in a stylized model of a corporate bond market under varying degrees of segmentation. In a second step, we use European firms' heterogeneous and sticky exposure to differently affected credit lines to instrument firm borrowing costs and estimate an investment elasticity of 0.83 following the unconventional monetary policy shock. Finally, we show that more research-intensive firms exhibit a stronger investment response to monetary policy shocks.

Presentations: EDGE Conference 2025, European University Institute

Abstract. This paper studies the causal effect of rising default costs on sovereign default probabilities. I employ a novel identification strategy that exploits changes in litigation-induced default costs of Latin American countries around legal news-shocks from Argentinian creditor lawsuits. I find that a one percentage point increase in recovery rates under U.S. law — caused by an increase in litigation-induced default cost — leads to a 0.46 percentage point reduction in default probability. I develop these results in a model of international borrowing with endogenous default and heterogeneous lenders who vary in their ability to impose economic costs on defaulting sovereigns. Here, similarly, adopting more punitive debt portfolios reduces the default probability by eliminating belief-driven debt crises equilibria. However, it can increase the severity of fundamental crises.

Presentations: CEPR Paris Symposium 2024, 96th International Atlantic Economic Conference, Philadelphia, PA, USA. European University Institute.

Abstract. This paper proposes a novel application of the synthetic control methodology to benchmark sustainable debt trajectories in low-income countries (LICs) using historically similar market access countries (MACs). In a first step, we empirically identify country-specific characteristics that have historically been associated with LICs’ debt carrying capacity. We then use these features as predictors in the synthetic control method design to construct a “most alike” synthetic control unit from historic MAC debt trajectories not resulting in debt stress events. This allows us to better pinpoint an estimated guidepost for medium- to long-term debt sustainability in LICs. Backtesting this approach for all LICs starting in 2015 shows that a deviation from the proposed sustainable benchmark is associated with a significantly higher risk of facing external debt distress in subsequent years.

Presentations: IMF Sovereign Debt Workshop.

Abstract. The COVID-19 pandemic has caused the most universal health and socio-economic crisis in recent history. However, the magnitude of the economic damage has differed widely; some countries were hit particularly hard, while others have managed to weather the storm much better. In this paper, we use cross-country regression analysis to identify factors that help explain the differences in the growth impact of the COVID-19 shock. Our findings underscore the critical role of balancing health and economic concerns in managing the pandemic as both a country’s exposure to the coronavirus and the stringency of containment measures are strongly correlated with its growth performance. In addition, our results shed light on several aspects of economic resilience. Good governance, provision of fiscal support and strong macroeconomic fundamentals all helped cushion the economic impact. By contrast, a lack of economic diversification – reflected in overreliance on the tourism sector or oil production – has significantly amplified the shock.

UN DESA Policy Paper