Does household leverage matter for worker job search, matching in the labor market, and wages? Theoretically, household leverage can have opposing effects on the labor market through debt-overhang and liquidity constraint channels. To test which channel dominates empirically, we exploit the...

We provide a theory on how a wider foreign lending base of local-currency sovereign debt may lead to destabilising effects (the original sin redux). Bond sell-offs by foreigners induce domestic banks to fund the government, reducing the credit for investment and tightening financial conditions....