Sasha Indarte

Sasha Indarte, Bad News Bankers: Underwriter Reputation and Contagion in Pre-1914 Sovereign Debt Markets.

Abstract: This paper uses new bond-level data on sovereign borrowing and defaults during 1869-1914 to quantify a channel of contagion via banks’ reputation for monitoring borrowers. Concerns over reputation incentivized Britain’s merchant banks (who underwrote sovereign bonds) to monitor and exert influence over sovereigns. Default signaled to investors that a bank was less willing or able to write and support quality issues, indicating that its other bonds may underperform in the future. Consistent with reputation-based contagion, I find that comovement between defaulting and non-defaulting bonds is six times larger when the bonds share an underwriter. To isolate the causal effect of a shared underwriter, I exploit within-country variation in bonds’ underwriters. Testing predictions from a dynamic game where underwriters build a reputation for monitoring, I find further evidence supporting reputation as the mechanism – as opposed to alternative explanations such as wealth effects. These findings highlight that the reputation of intermediaries that monitor and intervene in crises can be a powerful source of contagion unrelated to a borrower’s fundamentals.

Sasha Indarte, Moral Hazard versus Liquidity in Household Bankruptcy.

Abstract: This paper studies the role of moral hazard and liquidity in driving household bankruptcy. First, I estimate that increases in potential debt forgiveness have a positive, but small, effect on filing using a regression kink design. Second, exploiting quasi-experimental variation in mortgage payment reductions, I estimate that filing is five times more responsive to cash-on-hand than relief generosity. Using a sufficient statistic, I show the estimates imply large consumption-smoothing benefits of bankruptcy for the marginal filer. Finally, I conclude 83% of the filing response to dischargeable debt comes from liquidity effects rather than a moral hazard response to financial incentives.

Sasha Indarte, Financial Crises and the Transmission of Monetary Policy to Consumer Credit Markets.

Abstract: How does creditor health impact the pass-through of monetary policy to households? Using data on the universe of US credit unions, I document that creditor asset losses increase the sensitivity of consumer credit to monetary policy. Identification exploits plausibly exogenous variation in asset losses and high-frequency identification of monetary policy shocks. Weaker lenders can respond more if they face financial frictions that easing alleviates. The estimates imply constraints on monetary policy become more costly in financial crises featuring creditor asset losses, and that an additional benefit of monetary easing is that it weakens the causal, contractionary effect of asset losses.

Sasha Indarte and Gideon Bornstein, The Impact of Social Insurance on Household Debt.

Abstract: This paper investigates how the expansion of social insurance affects households’ accumulation of debt. Insurance can reduce reliance on debt by lessening the financial impact of adverse events like illness and job loss. But it can also weaken the motive to self-insure through savings, and households’ improved financial resilience can increase access to credit. Using two quasi experimental research designs, we estimate the causal effect of expanded insurance on household debt, exploiting the staggered expansions of one of the largest US social insurance programs: Medicaid. We find that expanding Medicaid increased credit card borrowing by 2.2%. Decomposing this effect in a model of household borrowing, we show that increased credit supply in response to households’ improved financial resilience fully accounts for this rise in borrowing and contributed to 17% of the total welfare gains of expanding Medicaid.