We study the extent to which unsecured credit markets have altered the transmission of increased income risk to consumption variability over the past several decades. We find that unsecured credit markets pass through increased income risk to consumption, irrespective of bankruptcy policy and...

The widespread use of debt and default suggests that unsecured credit markets play an important role in consumption smoothing. In this paper, I address two previously unanswered questions. First, how does policy towards debt default affect the evolution of consumption and net worth over the...

This paper considers tax policies to deal with Sudden Stops – declines in aggregate activity that are magnified by a binding collateral constraint – that occasionally occur in emerging market economies. Households and/or the government are assumed to face model uncertainty and desire...