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Working papers
From Sovereign to Corporate Risk: The Driving Role of Financial Uncertainty (Under Review)
Sovereign stress does not always spill over to the corporate sector. This paper uncovers the conditions under which risk contagion arises and identifies the firms most exposed. Using monthly sovereign and corporate credit default swap (CDS) spreads for France, Germany, and Italy from 2005 to 2016, I document that the transmission is both regime-dependent and heterogeneous across firms. First, financial-market uncertainty is the key vector of risk transmission. A panel threshold model shows that sovereign shocks have no effect on corporate credit risk when financial uncertainty is low. Conversely, in high-uncertainty regimes, a 10% increase in sovereign CDS raises corporate CDS by about 2\%. Second, firms are differently exposed to sovereign risk: high idiosyncratic volatility and high leverage amplify the propagation of sovereign stress. By contrast, fiscal fundamentals and firms’ sectoral exposure to government policy do not account for the observed nonlinear pattern. Overall, the results indicate that the spillover operates primarily through financial rather than fiscal mechanisms, highlighting the role of market volatility and firm-level financial constraints in the transmission of sovereign risk.
Macroeconomic and Environmental Effects of Climate Policy Uncertainty: A Sectoral Reallocation Perspective, Job Market Paper
This paper investigates sectoral reallocations in an economy where climate policy is uncertain. To this end, it develops a Dynamic General Equilibrium model with two sectors - a polluting one and a non-polluting one, along with climate externality and endogenous firm entry. Climate policy uncertainty stems from the possibility that the government may introduce a carbon tax in the next period. I show that, compared to a scenario without climate policy uncertainty, the probability of implementing carbon taxation prompts entrepreneurs to curtail investment in polluting firms' entry while promoting entry into the non-polluting sector. Through general equilibrium effects, these sectoral reallocations deteriorate welfare, generate a drop in economic activity, and increase CO2 emissions. I provide additional empirical evidence through a VAR model that supports these results. Overall, this paper points out the economic and environmental costs of climate policy uncertainty.
JobMarketPaper_Mourelon.pdfTransition Risk: Sources and Policy Responses, with S. Carattini, G.. Heutel and G. Melkadze [NBER Working Paper]
Transition risk is a major source of concern for financial surveillance authorities and central banks. Yet, the literature has so far focused mostly on climate policy shocks. This paper explores other sources of transition risk, which are also relevant for financial stability. We consider subsidies favoring the transition to a low-carbon economy and preferences changes among both consumers and investors. We then focus on policy responses to these risks. The core of the paper is a DSGE model that includes greenhouse gas emissions and a financial sector plagued with frictions from a principal-agent relationship between lenders and banks. Our results suggest that alternative sources of transition risk are an important threat to financial stability and that they have important policy implications.
Work in progress
Environmental Dynamic Stochastic General Equilibrium Models, with B. Annicchiarico, S. Carattini, C. Fischer, G. Heutel and A. Sardone
Distorsionnary fiscal policy and transition risk, with S. Carattini, G. Heutel and G. Melkadze
Time-inconsistency and Reputation in Climate Policy, with A. Titton
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