How costly is sovereign default? Since sovereign defaults often happen during recessions, I exploit variation in developing countries' currency denomination of external debt and quasi-random interest rate movements in advanced economies to construct a novel shift-share instrumental variable for the default decisions. Using a local projection shift-share instrumental variable (LP-SSIV) framework, I causally estimate that sovereign defaults on average lead to an immediate 8\% decline in real GDP per capita in the first year. The cumulative output losses peak at 18.5\% in the second year, remain economically significant through the fourth year, and gradually dissipate by the sixth year. These temporary baseline LP-SSIV estimates, which I interpret as the policy-relevant \textit{equilibrium} effects of sovereign default, are robust to narrative monetary shocks and alternative arrears-based continuous partial default measures. In contrast, specifications that account for the remaining unobserved mitigating channels---including spillover-corrected control function estimates, residualized LP-SSIV specifications, and difference-in-differences (DiD) estimators---produce similar short-run effects but substantially more long-lasting output losses. I interpret these persistent estimates as capturing the underlying \textit{structural} cost of sovereign default. Lastly, I find that floating exchange rate regimes and lower external debt levels, especially short-term debt, effectively attenuate the output losses following default.

The uncovered interest parity (UIP) condition predicts that the higher-interest-rate currency should depreciate so as to equalize expected returns across currencies. Yet despite its central role in international macro models, this condition is often rejected in the empirical data. This paper argues that UIP coefficient estimates are inherently regime-dependent, a latent feature that becomes visible once one studies their term structure. Using historical Eurocurrency/LIBOR deposit rates at the 1-, 3-, 6-, and 12-month maturities, I document three empirical facts. First, rolling-window UIP coefficient estimates are negatively related to the volatility of interest rate differentials, and this monotonic relationship evolves gradually over time rather than shifting discretely around the 2008 Global Financial Crisis. Second, both the sign and the magnitude of UIP coefficients vary across maturities: under normal times, short-maturity currency trades earn larger premia in high-volatility states, whereas near the zero lower bound the premium shifts toward longer-maturity deposits. Third, these maturity patterns are difficult to reconcile with a pure ``delayed-overshooting'' explanation based solely on sluggish exchange rate responses to monetary shocks, but they are also hard to explain using a standard finance-based ``risk premium'' argument alone. Instead, the term-structure evidence from UIP regressions points to the coexistence of both mechanisms, with time-varying risk premia---shaped in part by the signs of yield curve slopes---playing a central role in the UIP puzzle.

Are emerging markets' central banks credibly committed to inflation targeting? This paper applies the ``Optimal Policy Perturbation'' (OPP) framework of Barnichon and Mesters (2023) to evaluate monetary policy credibility across emerging economies. Combining impulse responses from a Bayesian VAR with professional forecasts from the Economist Intelligence Unit, I exploit the dual interpretation of the OPP statistic. First, under the assumption that observed policy rates are locally optimal given policymakers' information sets, I adopt a revealed-preference approach and recover time-varying implicit policy weights by minimizing deviations of the OPP statistic from zero. Second, under fixed benchmark weights, I use the OPP statistic to assess whether policy rates could have been adjusted to further reduce the policymaker's loss, and to quantify the direction and magnitude of such adjustments. The evidence indicates that inflation-target regimes in emerging markets have become increasingly credible since the early 2000s, with stronger anchoring of inflation expectations and reduced inflation persistence. While central banks face sharper trade-offs during global crises, monetary policy behavior typically reverts toward inflation stabilization, highlighting the flexibility and resilience of modern inflation-target frameworks.