I investigate the causes and consequences of the credit distribution, with a emphasis on income inequality. I work on various types of credit, such as household credit, firm credit and municipal credit markets.
1. Structure of Income Inequality and Household Leverage: Cross-Country Causal Evidence, European Economic Review, 2021, 132 (with Rémi Bazillier and Jérôme Héricourt). See also Lettre du CEPII N°379. In the media: Le Monde, The Conversation
Abstract: How does income inequality and its structure affect credit? Based on various strands of the literature, we hypothesize that rising income inequality should lead to higher house- hold credit at the aggregate level, and that a substantial part of this effect should be driven by the impoverishment of the middle class relative to top-income households. These intu- itions are empirically confirmed by a study based on a country-level dataset over the pe- riod 1970–2017. To identify exogenous variations in inequality, we develop an instrumental variable approach based on two types of country-level instruments: the total number of ratified ILO conventions and factor endowments. Our results show exogenous variations in inequality have a positive impact on household credit: a one-standard-deviation increase in the Gini index generates a 5- to 8- percentage-point expansion in the ratio of house- hold credit to GDP. In addition, the impact is 1.5–1.8 times stronger when the increase in inequality is driven by the income of top earners relative to the middle class rather than by the increase in top earners’ incomes at the expense of the lowest percentiles of the dis- tribution. Those results are robust to various sets of instruments, databases, controls, and variable definitions. They also consistently disappear in countries where financial markets are insufficiently developed.
Abstract: This paper investigates the debate between the Mundellian trilemma and the dilemma. Overall, the global financial cycle magnifies the binding effect of financial openness on monetary policy autonomy, and reduces the effectiveness of the floating exchange rate regime in isolating the domestic economy against financial pressures. I provide empirical evidence that the trilemma does not morph into a dilemma. Furthermore, the sensitivity to the global financial cycle depends more on the presence of global investors and global players than on the fluctuations of these financial forces.
2. La relation circulaire entre inégalités de revenu et finance: tour d’horizon de la littérature et résultats récents, Revue d’Economie Financière, 2018, 128(1), 127-152 (with Rémi Bazillier and Jérôme Héricourt).
- The Role of Wage Bargaining Institutions in the Phillips Curve Flattening (with Francesco de Palma, Jamel Saadaoui and Yann Thommen) BETA Working Paper (2022)
Abstract: We investigate the role of collective wage bargaining institutions on the relationship between wage growth and unemployment, that is, the wage Phillips curve. Based on a labour market model with frictions and collective bargaining, we hypothesize that when the economy deteriorates, wages fall less in parts of the economy covered by collective wage agreements negotiated by trade unions at a centralized level than in economies with bargaining fully decentralized within companies. We move from theory to empirical analysis using regional NUTS-2 data from European countries, which show evidence that the wage Phillips curve flattens when unemployment is high—and gets steeper when the labor market is overheated —, in economies where the sectoral or cross-sectoral levels play a role in the collective wage bargaining. We also find that from a level of centralization intermediate between the company and the sector levels, the wage Phillips curve is twice as flat.
2. Fire Sales and Debt Maturity (Available upon request)
Abstract: How does debt maturity structure affect fire sales? I show how debt maturity can trigger financial crises by introducing debt maturity in a Fisherian deflation model. In particular, using a stock/flow analysis, I find (i) that an excessive reliance on short-term debt exacerbates the risk of financial crises due to fire sales and (ii) that this risk is driven by a rise in the term premium. I confirm these two testable predictions with an empirical study of data from 69 emerging and developing countries from 1970 to 2017. This shows that debt maturity structure is a good early warning indicator of financial crises, which adds information compared with the level of external debt alone.
3. The unequal distribution of credit (Available upon request – with Salima Ouerk)
Work in Progress
- Assessing the distributional consequences of banking crises (with Clément Mathonnat and Jean-Marc Bédhat Atsebi)
- The Consequences of the Dexia Crisis (with Maxime Fajeau and Alexandre Mayol)
- A Social Mobility Dividend (with Laila Ait Bihi Ouali and Mehdi El Herradi)
- Common Agricultural Policy and Climate Shocks (with Rémi Généroso and Clément Nédoncelle)