Research
Job Market Paper
Debt Callability and Firm Dynamics
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Callable debt - a bond that allows the issuer to "redeem" or "call" the bond before its maturity - has reached a high proportion of corporate finance structures in the U.S. debt market. This paper examines the dynamic interaction between corporate bond callability and firm decisions. Using a comprehensive dataset spanning firm- and bond-level data, this study reveals that firms with higher credit risk tend to issue more callable bonds. To capture these dynamics, I develop a heterogeneous firm model with investment decisions, non-callable and callable debt, call options, and default risk. The model shows that smaller firms and those with higher credit risk are more inclined to issue callable bonds but tend to call them less frequently. However, when they do call, these firms show a relatively higher level of investment driven by favorable investment opportunities. Lastly, the share of callable bonds amplifies the firm's optimal behavior - investment and refinancing - particularly when calling in response to declining interest rates. This highlights callable debt's dual and asymmetric role in risk management and investment decisions.
Conferences and Seminars: University of Montreal, 2024 Annual Meeting CEA, Federal Reserve Bank of St. Louis, 2023 Annual Meeting CEA, 2023 CEA Graduate Poster Session, 2022 SCSE, 2022 17th CIREQ Ph.D. Students Conference, Quebec Social Sciences Ph.D. Students Seminar
Selected Work in Progress
1. Seniority Structure in Macroeconomics
Seniority in debt contracts refers to the order of repayment in the event of a firm's default, where senior debt holders are paid before junior creditors. The seniority hierarchy in debt contracts is increasingly relevant in firm financing, yet its aggregate effects are largely understudied. This paper investigates the macroeconomic implications of introducing a seniority structure in firm debt within a dynamic business cycle model with defaultable long-term debt. I show that seniority structure is essential in mitigating the debt dilution problem, which arises when firms issue new debt that diminishes the value of existing claims, particularly in long-term debt markets. By prioritizing senior claims in case of default, firms can protect senior debt holders from dilution, leading to a more efficient credit allocation. My model demonstrates that seniority structure reduces risk premia on senior bonds, lowers firm leverage, and induces more stable investment patterns. Additionally, I provide empirical evidence using firm-level data that seniority structure is associated with lower default rates and reduced financial fragility, particularly during economic downturns. On the aggregate level, introducing seniority in firm debt smooths business cycle fluctuations, reduces macroeconomic volatility, and enhances financial stability.
2. Monetary Policy Narratives and House Price Expectations
with Firmin Ayivodji (IMF)
This paper examines the impact of Central Bank narratives on house price expectations using a unique dataset from three different textual sources: direct central bank communication (monetary policy reports and speeches), newspaper articles, and Twitter posts. Leveraging advanced computational linguistics and machine learning techniques, we analyze the narrative tone in monetary policy reports, speeches, news articles, and tweets related to the monetary policy decisions of the Bank of Canada (BoC). Our findings reveal that narrative sentiment expressed in these sources significantly shapes expectations for future house prices. Furthermore, we observe that sentiment related to credit, financial conditions, and housing narratives holds considerable predictive power in shaping house price expectations. Additionally, we employ deep learning methods to extract information specifically related to the forward-looking aspects of sentiment in monetary policy narratives. These results highlight the pronounced impact of forward-looking narrative sentiment on house price expectations. The study suggests that social and news media can serve as valuable tools for central banks in managing economic expectations, with significant implications for the housing market.
3. Inside the Non-Compete Agreements Damages in the U.S.
with Firmin Ayivodji (IMF) and Felicien Goudou (Wayne State U.)
This paper investigates the economic and social repercussions of Non-Compete Agreements (NCAs) in the United States. On January 5, 2023, the Federal Trade Commission's (FTC) proposal to ban NCAs intensified public debate, making it a timely and relevant topic of study. Leveraging cutting-edge natural language processing (NLP) techniques, we analyze a large dataset of public comments submitted to the FTC and social media posts related to the proposed NCA ban to provide a comprehensive picture of how NCAs affect individuals and the economy. Our findings suggest that NCAs exacerbate mental health issues and contribute to family dislocations, reducing overall well-being. Furthermore, we document that NCAs limit worker mobility, stifle innovation, and constrain labor market competition, leading to inefficiencies in resource allocation. These negative impacts are particularly pronounced for low-wage workers and employees in highly specialized industries. The paper also provides evidence that large firms strategically use NCAs to retain high-paid talent and reinforce labor market power imbalances. In light of these findings, we argue that NCAs pose significant harm to both individuals and the broader economy and advocate for a reassessment of their role in the modern workforce. Our study contributes to the ongoing policy discussion by highlighting the nuanced and often underrepresented effects of NCAs and their implications for labor market dynamics and economic growth.
(a) New Job Opportunity
(b) Employee Mobility Restriction
(c) Health Employees
(d) Family Constraint
Publications (Before Ph.D.)
Twin Deficits : Empirical investigation for Togo
Forthcoming, 61st World Statistics Congress Proceedings
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Abstract
This paper investigates the hypothesis of twin deficits in Togo. There is a great economic debate about the twin deficits hypothesis which indicates a positive relationship between the current account deficit and the fiscal deficit resulting from changes in tax revenues or government expenditures. The presence of this link is rarely tested for developing countries. To examine the twin deficits in Togo, I use a Vector AutoRegression (VAR) framework, based on time series from the period 1975-2015. I find a unidirectional causality from the fiscal deficit to the current account deficit and this reveals the presence of twin deficits in Togo and also conformity with the Keynesian approach (conventional view).
Policy Papers
Reformer l’Enseignement Technique et de la Formation Professionnelle pour l’Employabilite des Jeunes en Afrique
L’Afrique Des Idées, 2018
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Abstract
Étreintes par le sous-emploi et le chômage des jeunes, les économies africaines devront réinventer leur système éducatif. Si le débat n’est pas nouveau, notamment en ce qui concerne le rôle de l’éducation dans la formation du capital humain, ses termes devront avancer en incluant les spécificités de la formation professionnelle. Les structures des économies et les bouleversements externes repositionnent la question de la formation pour l’emploi dans un contexte totalement rénové où le privé, l’informel, le numérique ont une nouvelle résonance. Bien entendu, le chômage des jeunes est sous tension, notamment parce que (i) un point de croissance économique ne génère que 0,4 point d’emplois en Afrique, (ii) moins de 16% des formations dans le supérieur constituent les formations dites « STEM», et (iii) seulement 15% du budget de l’éducation est consacré à la formation professionnelle. Cependant, la jeunesse la plus entreprenante du monde est en Afrique. Elle constitue 69% de la population, et ensemble avec le potentiel du numérique, offre des marges réelles de transformation de la dynamique de l’emploi en Afrique.