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on Financial Development and Growth |
| By: | Mr. Adolfo Barajas; Kensuke Sakamoto; Rasool Zandvakil |
| Abstract: | Economic benefits of financial inclusion, meaning a broadening access of the population to financial services, have been studied extensively, but less is known about its potential effects on financial stability. We explore the complementarity between credit booms and episodes of rapid expansion of the borrower base, or “credit inclusion, ” and find that the confluence of both helps to predict future financial distress. Rapid credit inclusion on its own does not usually portend future instability, but it is much more likely to do so when combined with a credit boom. These results can help to enhance the policymaker’s early warning toolbox. |
| Keywords: | Financial inclusion; Credit booms; Financial stability; Early warning indicators |
| Date: | 2026–01–16 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2026/008 |
| By: | Luis Araujo; Elton Beqiraj; David Hong; Sotirios Kokas; Raoul Minetti |
| Abstract: | Banking is increasingly a complex activity, with financial institutions cooperating in borrowers' financing and monitoring. We study an economy where banks use information to screen investment quality and to recover collateral from investments. Complex banking (lenders' joint production of information on borrowers) eases the salvage of investments but also facilitates the disclosure of investments' fragility. We find that complex banking can be a source of significant macroeconomic non-linearities: it enhances the resilience to small aggregate shocks but can precipitate a crisis following large negative shocks. The predictions of the model are consistent with evidence from matched bank-firm US data. |
| Keywords: | Banking; Aggregate Fluctuations; Information; Investments |
| JEL: | D83 E44 G21 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:sap:wpaper:wp269 |
| By: | Sergio Correia; Stephan Luck; Emil Verner |
| Abstract: | We study the causes and consequences of bank runs using a novel dataset on bank runs in the United States from 1863 to 1934. Applying natural language processing to historical newspapers, we identify 4, 049 runs on individual banks. Runs are considerably more likely in weak banks but also occur in strong banks, especially in response to negative news about the real economy or the broader banking system. However, runs typically only result in failure for banks with weak fundamentals. Strong banks survive runs through various mechanisms, including interbank cooperation, equity injections, public signals of strength, and suspension of convertibility. At the local level, bank failures (with and without runs) translate into substantially larger declines in deposits and lending than runs without failures. Our findings suggest that poor bank fundamentals are necessary for bank runs to translate into failure and for bank distress to generate severe economic consequences. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2601.20285 |
| By: | Jan Janku; Simona Malovana; Josef Bajzik; Klara Moravcova; Ngoc Anh Ngo |
| Abstract: | Credit cycles have become longer and more pronounced since the mid-1980s, often amplifying business cycle downturns. While many studies examine the interplay between credit and output, they disagree on the strength and persistence of these effects. We conduct a meta-analysis of over 2, 600 point estimates extracted from impulse response functions reported in 68 VAR-based studies across 63 countries. We find that output reacts quickly but briefly to credit shocks, whereas credit responses to output shocks are larger and more persistent, especially in advanced economies. Publication bias inflates reported effects, yet adjusted estimates remain economically significant. We also document substantial heterogeneity, with stronger responses in European samples, studies of corporate credit, and models using Bayesian methods or sign restrictions. These findings help clarify the typical dynamics between credit and output, informing monetary and macroprudential policy design. |
| Keywords: | Credit cycles, impulse response functions, meta-analysis, output, publication bias |
| JEL: | C32 C83 E32 G21 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:cnb:wpaper:2025/12 |
| By: | Chiara Casoli (InsIDE Lab, DiEco, Universita' degli Studi dell'Insubria, Fondazione Eni Enrico Mattei); Riccardo Lucchetti (Dipartimento di Scienze Economiche e Sociali - Universita' Politecnica delle Marche) |
| Abstract: | The yield curve is widely regarded as a powerful descriptor of the economy and market expectations. A common approach to its statistical representation relies on a small number of factors summarizing the curve, which can then be used to forecast real economic activity. We argue that optimal factor extraction is crucial for retrieving information when considering an approximate factor model. By introducing a rotation of the model including cointegration, we reduce cross-sectional dependence in the idiosyncratic components. This leads to improved forecasts of key macroeconomic variables during periods of economic and financial instability, both in the US and the euro area. |
| Keywords: | Yield curve, Nelson-Siegel model, Dynamic Factor Model, cointegration, forecasting |
| JEL: | C32 C53 E43 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:anc:wpaper:503 |
| By: | Daniele Caratelli; Jacob Lockwood; Robert Mann; Kevin Zhao |
| Abstract: | Countercyclical capital constraints allow banks to provide additional credit to consumers during recessions, smoothing consumption volatility (Working Paper no. 26-01). |
| Date: | 2026–01–22 |
| URL: | https://d.repec.org/n?u=RePEc:ofr:wpaper:26-01 |
| By: | Ali, Amjad; Asim, Muhammad; Ahmad, Khalil |
| Abstract: | Foreign direct investment plays a critical role in the economic development of emerging economies, including Pakistan, by fostering job creation, industrialization, and the transfer of technology. Tax policy is a central determinant in shaping investor confidence and influencing the inflow of foreign direct investment. This study examines the impact of taxation policy on foreign direct investment in Pakistan, while also considering gross domestic product growth, exchange rate, and domestic interest rate as control variables. Annual time-series data from 1975 to 2024, sourced from the World Bank, the Economic Survey of Pakistan, and the State Bank of Pakistan, are utilized for empirical analysis. The findings reveal that both the tax rate and exchange rate exert statistically significant and negative effects on foreign direct investment inflows, indicating that higher tax burdens and unfavorable exchange rates act as deterrents to foreign investors. In contrast, the domestic interest rate exhibits a strong positive association with foreign direct investment, while gross domestic product growth does not show a significant impact. Diagnostic tests confirm the robustness of the model and indicate the absence of major econometric issues. The results underscore the pivotal importance of an investor-friendly tax regime in attracting and sustaining foreign direct investment in Pakistan. Policymakers are therefore encouraged to reduce the overall tax burden and maintain macroeconomic stability to enhance Pakistan’s attractiveness as an investment destination on the global stage. |
| Keywords: | Foreign Direct Investment, Taxation Policy, Exchange Rate, Interest Rate |
| JEL: | F21 G2 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:127529 |
| By: | António Afonso; Eduardo Rodrigues |
| Abstract: | Savings play a critical role in both individual financial well-being and economic development. This article examines the impact of financial literacy, income, educational level, and age on saving decisions across 136 countries, using data from the Global Financial Inclusion Database (2021) and employing Generalized Structural Equation Modelling (GSEM). Financial literacy is conceptualized as a latent variable, based on five indicators related to financial knowledge, financial behavior, and financial attitudes, aligned with the Organization for Economic Co-operation and Development (OECD) pillars. The analysis demonstrates that financial literacy is a fundamental driver for saving in the short and long term. Education level and income are consistent predictors of savings, while age exhibits distinct effects depending on the savings objective. Regional differences emerge, with Latin American countries showing the strongest link between financial literacy and savings, whereas in high-income economies, its influence is less pronounced. These findings underscore the multifaceted role of financial literacy in shaping saving decisions and highlight its implications for tailored public policies. |
| Keywords: | financial literacy; savings; Generalized Structural Equation Modelling; behavioral economics; global survey. |
| JEL: | D14 G53 I22 C38 O16 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:ise:remwps:wp04032026 |
| By: | Khalid, Usman; Ali, Amjad; Audi, Marc |
| Abstract: | This paper examines the impact of mobile payments, financial literacy, and access to formal financial systems on borrowing practices among individuals residing in the European Union. It utilises data from the 2023 Flash Eurobarometer 525 and predicts the probability of consumer loan ownership through a logistic regression model. The analysis shows that borrowers generally possess higher financial literacy, suggesting an empowered approach to managing debt. Surprisingly, users of digital financial services tend to borrow less, potentially indicating that they prefer alternative tools or manage their finances more prudently. Moreover, possessing financial products such as savings accounts, mortgages, and insurance increases the likelihood of borrowing, whereas access to long-term investment products like pensions is linked with lower borrowing levels. These results suggest that borrowing decisions are partially influenced by access to financial instruments, individual financial knowledge, attitudes towards digital finance, and targeted policies emphasising education alongside comprehensive financial strategies. |
| Keywords: | Consumer Financial Behaviour, Financial Literacy, Borrowing Patterns, Digital Finance, European Union |
| JEL: | G2 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:127308 |
| By: | López, Axsell |
| Abstract: | This study assesses the relative technical efficiency of investment projects financed by the Central American Bank for Economic Integration (CABEI) over the period 2010-2024, evaluating their capacity to transform financial resources into development outcomes. A two-stage approach is applied, combining Data Envelopment Analysis (DEA) with bias correction via bootstrap and a censored regression model to examine efficiency determinants. The results indicate an average technical efficiency of 35%, with substantial heterogeneity across projects, countries, and sectors. The benchmarking analysis identifies a limited set of projects defining the efficient frontier. Moreover, efficiency is associated with both microeconomic factors related to project design and implementation and macroeconomic conditions in recipient countries. |
| Keywords: | Data Envelopment Analysis, CABEI, Technical Efficiency, Investment Projects, Tobit. |
| JEL: | C13 C14 C61 H43 O22 O54 |
| Date: | 2026–01–21 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:127812 |
| By: | Lin, Jessie |
| Keywords: | International Development |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea25:361026 |
| By: | Tomohiro Hirano; Alexis Akira Toda |
| Abstract: | Since McCallum (1987), it has been well known that in an overlapping generations (OLG) economy with land, the equilibrium is Pareto efficient because with balanced growth, the interest rate exceeds the growth rate (R > G), precluding infinite debt rollover (a Ponzi scheme). We show that, once we remove knife-edge restrictions on the production function and allow unbalanced growth, under some conditions an efficient equilibrium with land bubbles necessarily emerges and infinite debt rollover becomes possible, a markedly different insight from the conventional view derived from the Diamond (1965) landless economy. We also examine the possibility of Pareto inefficient equilibria. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:cnn:wpaper:26-002e |
| By: | Mr. Raphael A Espinoza; Metodij Hadzi-Vaskov; Luis Carlos Ibanez-Thomae; Flora Lutz |
| Abstract: | We investigate the factors determining emerging markets’ likelihood to access international capital markets. First, we develop a simple model to outline the theoretical foundations of market access, highlighting the role of risk, spreads, net worth, and the cost of repaying debt. The model also shows a trade-off between risk insurance and moral hazard and underscores the relevance of unconventional instruments such as guarantees and macro-contingent debt. Second, we estimate a random forest model to assess the key predictors of market access. We find that outstanding obligations, reserves, short-term external debt, EMBIG spreads and the size of the economy are key predictors of market access. Important non-linear effects include an inverted U-curve for the effect of spreads on likelihood of issuance; a positive relationship between likelihood of issuance and external debt at low spreads that turns negative at high spreads; and a high sensitivity to governance only for high spreads. Finally, we collect a novel dataset and examine the characteristics of high spread issuances, which are often unconventional and include guarantees, contingencies or collateral, in line with what theory predicts. |
| Keywords: | Market access; Spreads; Credit rationing; Machine Learning; Random Forest; Moral Hazard |
| Date: | 2026–01–16 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2026/010 |
| By: | Gianmaria Brunazzi; Cristina Re |
| Abstract: | This paper argues that the current proliferation of commercial tensions, monetary conflicts and military confrontations is not an irrational departure from economic logic, but the manifestation of a structural transformation of the world economy. We develop a model of debt imperialism in which the centre sustains its dominance by issuing internationally demanded liabilities that enable persistent external deficits and reinforce dependence on the dollar and on the centre’s market, while simultaneously favouring the industrial expansion of semi-peripheral economies. As these economies grow, they become potential challengers whose trajectories must be actively managed and periodically disciplined in order to preserve the hierarchy of the system. The paper confronts this framework with a wide set of international data (World Bank, IMF, UNCTAD, US Treasury and BEA). We analyse global balance-of-payments indicators from 1975 to 2023 and then examine the evolution of the United States’ trade creditors and the geography and composition of foreign holdings of its external liabilities. The results identify two distinct phases: a pre-2008 hegemonic phase characterised by relatively smooth surplus recycling into the centre, and a post-2008 phase marked by growing volatility, the fragmentation of the integrated world market, the reconfiguration of trade and financial circuits, and the decline of the previous globalisation regime. This analysis shows that the fragmentation of the global economy after 2008 has not resulted from a collapse of U.S. centrality, but from a defensive reorganisation of trade, financial and geopolitical relations aimed at disciplining both allies and semi-peripheral challengers |
| Keywords: | Debt imperialism; US Dollar Hegemony; Semi-periphery; Financial Crisis; Trade War. Jel Classification: F51; F54; N10 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:usi:wpaper:938 |
| By: | Ana Aguilar; Rafael Guerra; Carola Müller; Alexandre Tombini |
| Abstract: | This paper investigates the impact of domestic economic policy uncertainty (EPU) on macroeconomic and financial variables in emerging market economies, focusing on Latin America. Using a panel dataset for Brazil, Chile, Colombia and Mexico from 2005 to early 2025, we find that domestic EPU shocks cause significant macroeconomic disruptions, leading to a contraction in output and a rise in inflation, akin to a supply shock. These effects are transmitted through a financial channel in the short term, via higher risk premia, increased equity market volatility and exchange rate depreciations, and through a real channel in the medium term, via declines in growth expectations and consumer and business confidence. Our analysis further reveals that EPU shocks are most damaging when the economy is weak or financial conditions are tight, while stronger economies are better able to absorb such shocks. |
| Keywords: | macroeconomy, uncertainty, economic policy uncertainty, Latin America |
| JEL: | C33 D80 E23 E31 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1324 |
| By: | Enrique G. Mendoza; Vincenzo Quadrini |
| Abstract: | We study how the increased cross-country ownership of financial assets between advanced and emerging economies impacted their financial and macroeconomic volatility. While cross-country ownership improved risk-sharing and reduced volatility associated with financial crises, it also increased the exposure of countries to foreign crises, leading to higher international co-movement. Through quantitative applications of a two-region model representative of advanced and emerging economies, we find that financial globalization reduced volatility worldwide, but significantly more in emerging economies. |
| JEL: | F40 F41 G01 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34689 |
| By: | Enrique G. Mendoza; Vincenzo Quadrini |
| Abstract: | We propose a framework for studying financial and macroeconomic dynamics in an environment where liquid assets have a productive use but their supply is limited (i.e., the economy is starved for liquidity). The private demand for financial assets arises from the need to hold them for production. The private supply of financial assets is limited and unstable because of borrowing constraints and default risk. We discuss open-economy applications that analyze the accumulation of foreign reserves by emerging economies, the increase in public debt issued by advanced economies, the rapid growth of emerging economies, structural changes in financial markets, and financial globalization. A key result is that most of these developments led to a decline in interest rates and an increase in global macroeconomic volatility, driven by riskier borrower portfolios. |
| JEL: | F40 F41 G15 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34688 |
| By: | María Alejandra Amado (BANCO DE ESPAÑA) |
| Abstract: | Macroprudential FX regulations aim to reduce systemic currency-mismatch risks, yet their distributional effects on firms’ access to credit remain poorly understood. This paper studies Peru’s 2014 dedollarization policy, which sharply increased reserve requirements on banks’ foreign-currency liabilities in proportion to their dollar lending to nontradable firms. Exploiting cross-sectional variation in banks’ exposure and using administrative loan-level data covering the universe of firms, I find that moving from the median to the 75th percentile of exposure reduces growth in total new loans by roughly 10 percentage points for micro and small firms, with no significant effects for medium or large firms. Larger firms absorb the shock by reallocating borrowing across banks and into local currency credit, whereas micro firms experience sharp declines in both dollar and total credit, higher borrowing costs, and modest employment losses. The results highlight a trade-off between macroprudential objectives and credit access for small firms. |
| Keywords: | macroprudential FX regulations, currency mismatch, small firms, emerging markets, borrowing constraints, bank lending channel |
| JEL: | E43 E58 F31 F38 F41 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:bde:wpaper:2604 |
| By: | Wright, Julian |
| Abstract: | This paper presents a model where shocks to interest rates, company earnings and the earnings of financial intermediaries all affect the investment of small but not large firms. These shocks also affect the extent of financial intermediation and companies' debt choice. Evidence from micro and macro data supports the model's predictions. I show that shocks which work by weakening the financial position of firms can explain a sizeable part of the growth slowdown in recessions. Conversely, I show that shocks which work by restricting the ability of financial intermediaries to lend are not significant. Consistent with this I find little evidence of a bank lending channel. |
| Keywords: | Financial Economics |
| URL: | https://d.repec.org/n?u=RePEc:ags:canzdp:263780 |
| By: | Gabriela Araujo; David Rivero Leiva; Hugo Rodríguez Mendizábal |
| Abstract: | This paper develops a general equilibrium banking model where lending and payment flows endogenously link credit, liquidity, and solvency risks. Banks issue deposits at loan origination. As deposits circulate, reserve settlement creates liquidity exposure and repayment shortfalls generate credit and solvency risks. These risks are jointly determined by credit provision and bound balance sheet expansion at an internally determined profitability threshold rather than an external funding or capital limit. We present an application of the theory that provides a new look to the bank lending channel where monetary policy operates through the endogenous generation of bank risks. Our quantitative results align with empirical observations, including declines in deposit growth after monetary policy tightening and its different impact on lending depending on the balance sheet strength of banks as well as the relation of funding costs in interbank markets with liquidity and solvency ratios. |
| Keywords: | banks, credit risk, interbank market, liquidity risk, monetary policy, payments, risk premium, solvency risk |
| JEL: | E10 E44 E52 G21 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:bge:wpaper:1549 |
| By: | Guender, Alfred V. |
| Abstract: | The effectiveness of the bank lending channel of monetary policy hinges on the extent to which changes in the availability of bank credit relative to non-bank credit are systematically transmitted to the real sector of the economy. On this count, there is no evidence of a link between three finance mix , variables and economic activity in New Zealand during selected intervals over the 1967-87 period. Similar, unfavourable results are reported by the investigation of the connection between movements in an interest rate spread and real economic performance between 1975 and 1994. Moreover, neither the finance mix variable nor the spread respond consistently to changes in various indicators of monetary policy. The results reported in the paper cast serious doubt on the existence of a potent bank lending channel of monetary policy in New Zealand either before or after the reforms of the mid-1980s. |
| Keywords: | Financial Economics |
| URL: | https://d.repec.org/n?u=RePEc:ags:canzdp:263783 |
| By: | Fernando Avalos; Boris Hofmann; José María Serena Garralda |
| Abstract: | Private equity funds play an increasingly important role in financial systems. Yet, the impact of monetary policy on their activity has been little explored so far. In this paper, we analyse the transmission of monetary policy through private equity (PE) deals, focusing on the impact on: (i) the volume of private equity deals; (ii) the use of leverage; and (iii) the pricing of those deals. We find that contractionary monetary policy shocks to the short end of the yield curve tend to dampen private equity activity, by reducing deal volumes, the use of leverage and deal prices. A credit channel of monetary transmission seems to affect deal volumes and the use of leverage, while a valuation channel appears to drive the transmission to deal pricing. Monetary policy shocks to the long end of the yield curve have weaker effects on PE activity. |
| Keywords: | private equity, buyouts, monetary policy, credit spreads, equity risk premium |
| JEL: | G21 G32 F32 F34 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1326 |
| By: | Souibgui, Moez; Abida, Zouheir |
| Abstract: | This study examines the relationship between the real effective exchange rate (REER) and economic growth in Tunisia from 1980 to 2011, using the Generalized Method of Moments (GMM). The analysis incorporates key macroeconomic variables, including initial GDP per capita, investment, public expenditure, trade openness, and human capital, to assess their impact on economic performance. The results indicate that real exchange rate depreciation has a negative but statistically insignificant effect on growth. While depreciation may enhance external competitiveness and stimulate exports, its impact remains contingent on import costs and inflationary pressures. Conversely, trade openness and human capital have positive and statistically significant effects, reinforcing the argument that economic liberalization and investment in human capital are crucial drivers of growth. Public expenditure, however, shows a negative and significant relationship with growth, suggesting potential inefficiencies in fiscal policy. These findings highlight the importance of exchange rate management, investment policies, and trade liberalization in fostering economic development. Policymakers should prioritize structural reforms, technology transfer, and private investment to enhance long-term growth prospects. The study’s insights are particularly relevant for other developing economies seeking to optimize exchange rate policies and economic strategies to achieve sustainable growth. |
| Keywords: | Real Effective Exchange Rate, Economic Growth, Human Capital, Tunisia |
| JEL: | A1 A10 A13 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:127389 |
| By: | Harry Aytug |
| Abstract: | Does euro adoption affect long-run economic growth? Existing evidence is mixed, reflecting limited treated countries, long horizons that challenge inference, and heterogeneity across member states. We estimate causal dynamic and heterogeneous treatment effects using Causal Forests with Fixed Effects (CFFE), a machine-learning approach that combines causal forests with two-way fixed effects. Under a conditional parallel-trends assumption, we find that euro adoption reduced annual GDP growth by 0.3-0.4 percentage points on average. Effects emerge shortly after adoption and stabilize after roughly a decade. Average effects mask substantial heterogeneity. Countries with lower initial GDP per capita experience larger and more persistent growth shortfalls than core economies. Weaker consumption and productivity growth contribute to the overall effect, while improvements in net exports partially offset these declines. A two-country New Keynesian DSGE model with hysteresis generates qualitatively similar patterns: one-size-fits-all monetary policy and scarring mechanisms produce larger output losses under monetary union than under flexible exchange rates. By jointly estimating dynamic and heterogeneous treatment effects, the analysis highlights the importance of country characteristics in assessing the long-run consequences of monetary union. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2601.20169 |
| By: | Romain Baeriswyl; Kene Boun My; Camille Cornand |
| Abstract: | In a monetary system in which risk-free and risky money coexist, Gresham's law predicts that people will prefer to hoard risk-free money as a store of value and spend risky money as a medium of exchange. Establishing a payment system on the basis of risk-free money, such as a retail CBDC, while maintaining the fractional reserve banking system in place poses numerous challenges. In a laboratory experiment, we demonstrate that when the holding of risk-free money is unrestricted, people hold and pay with it extensively. However, when the ability to hold risk-free money is limited by a ceiling or an unattractive interest rate, people tend to hoard risk-free money and use risky money for payments. |
| Keywords: | Central Bank Digital Currency, Gresham's law, Laboratory experiment |
| JEL: | E52 E58 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:snb:snbwpa:2026-03 |
| By: | Joe Cannataci; Benjamin Fehrensen; Mikolai G\"utschow; \"Ozg\"ur Kesim; Bernd Lucke |
| Abstract: | The European Central Bank (ECB) is working on the "digital euro", an envisioned retail central bank digital currency for the Euro area. In this article, we take a closer look at the "digital euro FAQ", which provides answers to 26 frequently asked questions about the digital euro, and other published documents by the ECB on the topic. We question the provided answers based on our analysis of the current design in terms of privacy, technical feasibility, risks, costs and utility. In particular, we discuss the following key findings: (KF1) Central monitoring of all online digital euro transactions by the ECB threatens privacy even more than contemporary digital payment methods with segregated account databases. (KF2) The ECB's envisioned concept of a secure offline version of the digital euro offering full anonymity is in strong conflict with the actual history of hardware security breaches and mathematical evidence against it. (KF3) The legal and financial liabilities for the various parties involved remain unclear. (KF4) The design lacks well-specified economic incentives for operators as well as a discussion of its economic impact on merchants. (KF5) The ECB fails to identify tangible benefits the digital euro would create for society, in particular given that the online component of the proposed infrastructure mainly duplicates existing payment systems. (KF6) The design process has been exclusionary, with critical decisions being set in stone before public consultations. Alternative and open design ideas have not even been discussed by the ECB. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2601.18644 |
| By: | Rui Xu |
| Abstract: | The rise of fintech lenders has intensified competition in the banking industry. This study utilizes Brazilian bank-level data to examine the causal impact of increased competition on commercial banks’ lending rates and profitability. Employing a bank-specific Bartik exposure, constructed from comprehensive credit and balance sheet information across all Brazilian banks and fintech lenders, the analysis reveals that commercial banks sustained their loan portfolios primarily by lowering lending rates. Specifically, a one standard deviation increase in fintech competition exposure corresponds to a 3.7 percentage point reduction in average lending rates at commercial banks. Banks’ operational efficiency increased due to heightened competition, but their net interest margins narrowed, adversely affecting overall profitability. Between 2018 and 2024, fintech competition is estimated to have lowered banks’ average lending rates by 2.7 percentage points and reduced traditional banks' net interest margins by 0.9 percentage points. |
| Keywords: | Brazil; fintech lenders; digital banks; commercial banks; competition; lending rates; profitability; operational efficiency. |
| Date: | 2026–01–16 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2026/007 |
| By: | Hamoon Soleimani |
| Abstract: | Since its inception, Bitcoin has been positioned as a revolutionary alternative to national currencies, attracting immense public and academic interest. This paper presents a critical evaluation of this claim, suggesting that Bitcoin faces significant structural barriers to qualifying as money. It synthesizes critiques from two distinct schools of economic thought - Post-Keynesianism and the Austrian School - and validates their conclusions with rigorous technical analysis. From a Post-Keynesian perspective, it is argued that Bitcoin does not function as money because it is not a debt-based IOU and fails to exhibit the essential properties required for a stable monetary asset (Vianna, 2021). Concurrently, from an Austrian viewpoint, it is shown to be inconsistent with a strict interpretation of Mises's Regression Theorem, as it lacks prior non-monetary value and has not achieved the status of the most saleable commodity (Peniaz and Kavaliou, 2024). These theoretical arguments are then supported by an empirical analysis of Bitcoin's extreme volatility, hard-coded scalability limits, fragile market structure, and insecure long-term economic design. The paper concludes that Bitcoin is more accurately characterized as a novel speculative asset whose primary legacy may be the technological innovation it has spurred, rather than its viability as a monetary standard. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.07840 |