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on Financial Development and Growth |
| By: | Berrayhane, Hana; El Ferktaji, Riadh |
| Abstract: | This study examines the combined impact of financial openness and digital transformation on economic growth, distinguishing between developed and emerging countries. Although these two factors have been widely studied separately, their interaction has not been explicitly addressed in existing literature. This study aims to fill this research gap by analyzing their joint effects on economic growth. Our study covers a sample of 37 countries, including 17 emerging and 20 developed economies, over the period 2010–2023. The main finding of this study highlights that the interaction between financial openness and digital transformation produces differentiated effects depending on the level of development. For emerging economies, the negative and statistically significant effect suggests that, without strong institutions or mature digital infrastructures, this interaction may exacerbate economic vulnerabilities. For developed countries, the absence of significance indicates that, despite a slight negative tendency, their robust systems help absorb the potential adverse effects of this interaction. |
| Keywords: | Financial openness, Digital transformation and Economic growth. |
| JEL: | F36 O43 O47 |
| Date: | 2026–01–09 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:127658 |
| By: | Lwanga Elizabeth Nanziri; Paul Terna Gbahabo; Daniel Ofori-Sasu |
| Abstract: | This study examines the effect of open banking on financial inclusion in South Africa. |
| Date: | 2026–03–16 |
| URL: | https://d.repec.org/n?u=RePEc:rbz:wpaper:11100 |
| By: | Rita Pető (HUN-REN Centre for Economic and Regional Studies); Balázs Reizer (HUN-REN Centre for Economic and Regional Studies) |
| Abstract: | How does foreign direct investment impact wages and the task content of jobs? Using linked employer-employee data from Hungary and an event study approach we show that FDI increases the returns to abstract tasks, while it does not affect the returns to routine and face-to-face tasks. This finding appears to be driven by skill-biased changes in technology, as acquired firms innovate more with their foreign partners, import more machines and improve product quality. These suggest that FDI-induced technological change is an important driver of growing inequality in developing countries. |
| Keywords: | wage inequality, foreign-owned firms |
| JEL: | J31 M52 F23 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:has:discpr:2510 |
| By: | Gonzalo E. Basante Pereira; Ina Simonovska |
| Abstract: | We develop a framework to measure the severity of financial constraints for young firms across countries. Using ORBIS balance-sheet data for 23 economies, we show that short-term leverage rises while long-term leverage falls early in firms’ life cycles, with this pattern persisting longer where contract enforcement is weaker. We build a model of optimal financing under limited enforcement with endogenous debt maturity and blueprint capacity that matches these patterns and enables structural measurement of financial constraints. The framework decomposes the funding gap into within-firm borrowing constraints that ease with repayment history and a scale distortion identifiable through cross-country comparisons. |
| JEL: | F34 G15 G3 G33 O43 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34985 |
| By: | Melecky, Martin; Ruiz Ortega, Claudia; Bizhan, Asset; Jambal, Ganbaatar |
| Abstract: | This paper evaluates the employment and sales effects of two widely used financial support instruments for small and medium-sized enterprises, interest rate subsidies and credit guarantees, using administrative program data from Kazakhstan matched to the universe of firms. Utilizing staggered intervention rollouts and a difference-in-differences design, the analysis reveals significant differences across program designs and local labor market conditions. Interest rate subsidies, despite their large fiscal costs, fail to improve firm performance: beneficiary firms experience a 10 percent decline in employment and no significant increase in sales. Fully subsidized credit guarantees show no discernible effects on sales or employment. By contrast, a market-aligned, fee-based partial credit guarantee that ensures lender and borrower risk-sharing increases employment by 24 percent and sales by 21 percent, with particularly stronger effects among women-led and formally incorporated businesses. These employment gains are substantially larger in regions with higher pre-program unemployment, suggesting that well-designed credit guarantees are more likely to generate net job creation in labor markets with greater slack, rather than merely reallocating workers across firms. Overall, the findings underscore the pivotal role of incentive-compatible program design and local labor market condit ions in determining the effectiveness of financial policies for small and medium-sized enterprises. |
| Date: | 2026–03–23 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11344 |
| By: | Abigail Opokua Asare (University of Oldenburg, Department of Economics) |
| Abstract: | This paper examines whether the success of prior aid projects affects the performance of subsequent ones based on a study of World Bank projects in Africa. While existing research has shown that aid effectiveness depends on macroeconomic conditions, institutional quality, and managerial capacity, far less is known about whether project success generates localized improvements that extend beyond its immediate boundaries. Using geocoded data and independent evaluation ratings of World Bank projects, this study finds that local success does not systematically translate into higher performance for subsequent projects. In fact, it can sometimes make it less likely for future projects to achieve top outcomes. I also found evidence of a negative effect in localities with dense exposure to highly satisfactory projects. Regions with a mix of highly rated and moderately rated projects tend to do better in the future than those with only top-rated projects. This means that while lessons have been learned from very successful projects, having too many of these in one place can have negative spillovers. Therefore, close monitoring is needed in regions with high concentrations of top-performing projects to ensure that early successes and lessons learned are managed appropriately, preventing them from undermining later performance. |
| Keywords: | Aid effectiveness, World Bank, project success, localized learning |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:old:dpaper:454 |
| By: | Zhang, Yuliang |
| Abstract: | I introduce an index that formulates the vulnerability of the banking sector from a systemic risk perspective. It is expressed in terms of the size-weighted leverage and the illiquidity-weighted Herfindahl–Hirschman Index. The empirical implementation is demonstrated using balance sheet data from U.S. bank holding companies during 2001–2024 and national banks during the Great Depression. The index can be used to monitor financial instability, activate macroprudential capital buffers, and analyse historical banking crises. |
| Keywords: | measurement; financial vulnerability; macroprudential policy; banking crises |
| JEL: | F3 G3 |
| Date: | 2026–03–10 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:137224 |
| By: | Matheus R. Grasselli; Adrien Nguyen-Huu |
| Abstract: | We develop a stochastic macro-financial model in continuous time by integrating two specifications of the Keen economic framework with a financial market driven by a jump-diffusion process. The economic block of the model combines monetary debt-deflation mechanisms with Ponzi-type financial destabilization and is influenced by the financial market through a stochastic interest rate that depends on asset price returns. The financial market block of the model consists of an asset with jump--diffusion price process with endogenous, state-dependent jump intensities driven by speculative credit flows. The model formalizes a feedback loop linking credit expansion, crash risk, perceived return dynamics, and bank lending spreads. Under suitable parameter restrictions, we establish global existence and non-explosion of the coupled system. Numerical experiments illustrate how variations in credit sensitivity and jump parameters generate regimes ranging from stable growth to recurrent boom--bust cycles. The framework provides a tractable setting for analyzing endogenous financial fragility within a mathematically well-posed macro--financial system. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2603.07213 |
| By: | Engelbert Stockhammer |
| Abstract: | The paper discusses the historical development of the debate on financialization supported by bibliometric analysis. There are several origins of the concept of financialisation in the 1990s and in the early 2000s this consolidates in a transdisciplinary project: an attempt to create a critical conversation across academic disciplines about the impact of finance on the economy and society. This was driven by the team of CRESC by organising workshops and special issues, involving critical business studies, constructivist approaches on the household and heterodox macroeconomics. This created the basis for the success of the concept and, since the global financial crisis, enabled an explosive rise of studies on financialisation. But with success also come a fragmentation of the debate and its disintegration along disciplinary lines. Thus, research on financialization today is published in more prestigious journals, but it has decoupled from the core financialisation debate of the 2000s. |
| Keywords: | financialization, sociology of science, bibliometric analysis, history of thought |
| JEL: | B29 B59 G30 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:pke:wpaper:pkwp2608 |
| By: | Pawel Janas |
| Abstract: | This paper studies the long-run labor market consequences of lender-of-last-resort (LLR) intervention during the Great Depression. I exploit a natural experiment created by the Federal Reserve district border separating counties under the jurisdiction of the Atlanta and St. Louis Federal Reserve Banks. During the banking panic of 1930, the Atlanta Fed aggressively extended liquidity to distressed banks, while the St. Louis Fed largely refrained from intervention. Using newly digitized county-level manufacturing data and linked individual-level census records from 1930 and 1940, I examine how exposure to this liquidity support affected local economic activity and worker outcomes. Counties within the Atlanta district experienced fewer bank failures and stronger manufacturing performance in the early 1930s. These differences translated into persistent labor market effects: individuals in treated counties were more likely to remain in manufacturing employment and less likely to migrate across state lines by 1940. The results suggest that financial stabilization policies can shape the long-run allocation of labor across regions and sectors. |
| JEL: | E58 G01 N22 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34988 |
| By: | Fabrizio Zampolli |
| Abstract: | Conventional indicators of fiscal sustainability, such as the interest rate-growth differential that focus on long-term drivers do not always incorporate fluctuating financial conditions and risk. This paper proposes an analytical framework in which sovereign borrowing costs depend on the balance-sheet capacity of financial intermediaries, where financial amplification can generate an endogenously tighter debt limit even in the absence of fiscal fatigue or explicit default risk. Fiscal space becomes state-contingent: identical yield shocks compress fiscal space more strongly when the economy is closer to its debt limit. We examine four financial amplification mechanisms: the bank-sovereign nexus, "original sin redux" , duration matching, and deleveraging in repo markets. |
| Keywords: | fiscal sustainability, fiscal space, debt limit, financial stability, sovereign bond market, non-bank financial institutions |
| JEL: | E43 E44 E62 G23 H63 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1339 |
| By: | Julián Andrada-Félix (Department of Quantitative Methods in Economics and Management, Universidad de Las Palmas de Gran Canaria, Spain.); Marta Gómez-Puig (Department of Economics and Riskcenter, Universitat de Barcelona, Spain.); Simón Sosvilla-Rivero (Complutense Institute for Economic Analysis, Universidad Complutense de Madrid, Spain.) |
| Abstract: | Comparing the UK’s 2022 sovereign debt crisis with earlier European examples is crucial for a holistic understanding of how such crises emerge and evolve to better comprehend the warning signs of sovereign distress and the importance of coherent and credible economic governance. Both crises were marked by sudden and severe shifts in investor confidence. The UK government’s “mini budget” announcement on September 23, 2022, sent yields on UK gilts soaring at a daily rate not seen since the 1990s. Similarly, official disclosure by Papandreou’s government regarding the actual state of Greece’s public finances on October 20, 2009, caused daily sovereign debt yields in some euro area countries to rise to levels not seen since joining the euro. The primary objective of this paper is to conduct a comparative econometric analysis of the euro area sovereign bond market, with the goal of identifying past episodes similar to the turmoil experienced in the UK government bond market during September–October 2022. This comparative perspective aims to provide valuable insights for future crisis prevention in an increasingly interconnected global financial system. Specifically, we use daily data on 10-year government bond yields from January 3, 2000, to June 30, 2023, and apply both univariate and multivariate nearest neighbours’ techniques. We also introduce a novel methodology, k-Related Simultaneous Nearest Neighbours (k-RSNN), which offers significant advantages over traditional forecasting models such as ARIMA and GARCH (it enables simultaneous analysis of multiple sovereign bond markets, effectively capturing cross-country dynamics, detecting nonlinear patterns and structural breaks, and identifying past events similar to recent crises). Our results show that financial markets initially interpreted the UK bond market disruptions between October 17 and 31, 2022, as comparable to the fiscal credibility crises faced by Spain and Italy during the European sovereign debt crisis. However, after the Bank of England’s targeted intervention, perceptions of the UK’s fiscal credibility shifted toward alignment with core euro area countries. Finally, from January 16 to June 30, 2023, we find strong parallels with the sovereign-bank risk nexus that previously affected Spain and Italy during the euro area crisis. Our findings indicate that although the origins of the crisis in the UK and the euro area are different (lack of fiscal credibility and poor communication vs. solvency concerns, weak banking systems, and limitations of incomplete economic unions), examining them together offers valuable lessons: policymakers should better recognise early warning signs of sovereign distress and reinforce the importance of coherent and credible economic governance. |
| Keywords: | Financial crisis; Bond markets; Fiscal credibility; United Kingdom; Analogies; Nearest Neighbours’ Analysis. JEL classification: C22; G14; H30; H61. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:ira:wpaper:202525 |
| By: | Kemeny, Thomas; Connor, Dylan Shane; Suss, Joel; Xie, Siqiao; Jang, Jiwon; Gu, Zhining |
| Abstract: | Despite extensive research on spatial inequality, the geography of wealth remains understudied. We develop a theoretical framework explaining why wealth’s spatial distribution differs from income’s and how local advantages create self-reinforcing dynamics. Using novel data tracking household net worth across 722 U.S. commuting zones from 1960-2020, we establish five stylized facts. Wealth is 60-70% more spatially concentrated than income, with patterns distinct from income and housing values. Post-1980 increases in between-place inequality reflect places changing positions rather than divergence. Within places, bottom 50% wealth shares declined nationwide. These patterns reveal feedback mechanisms compounding spatial advantages, highlighting welfare disparities exceeding income-focused research. |
| JEL: | N30 D31 E21 R10 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:137667 |
| By: | Arnaud Natal (IFP - Institut Français de Pondichéry - MEAE - Ministère de l'Europe et des Affaires étrangères - CNRS - Centre National de la Recherche Scientifique, BSE - Bordeaux Sciences Economiques - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique, UB - Université de Bordeaux); Isabelle Guérin (CESSMA UMRD 245 - Centre d'études en sciences sociales sur les mondes africains, américains et asiatiques - IRD - Institut de Recherche pour le Développement - Inalco - Institut National des Langues et Civilisations Orientales - UPD7 - Université Paris Diderot - Paris 7, IFP - Institut Français de Pondichéry - MEAE - Ministère de l'Europe et des Affaires étrangères - CNRS - Centre National de la Recherche Scientifique, IRD [Ile-de-France] - Institut de Recherche pour le Développement) |
| Abstract: | This brief provides a first global estimate of everyday indebtedness. It suggests that at least 33% of the world's population relies on borrowing to meet basic needs – a figure that is likely underestimated. This widespread reliance on debt reflects structural gaps in incomes, labour markets, and social protection systems. Addressing everyday indebtedness requires expanding social protection, stabilising incomes, treating debt as a systemic issue rather than an individual failing, and improving data on informal, unsecured, and non-asset-building forms of borrowing. |
| Abstract: | Cette policy brief présente une première estimation mondiale de l'endettement quotidien. Il suggère qu'au moins 33 % de la population mondiale dépend de l'emprunt pour subvenir à ses besoins fondamentaux, un chiffre probablement sous-estimé. Ce recours généralisé à l'endettement reflète des disparités structurelles en matière de revenus, de marchés du travail et de systèmes de protection sociale. Pour lutter contre l'endettement quotidien, il convient d'étendre la protection sociale, de stabiliser les revenus, de traiter l'endettement comme un problème systémique plutôt que comme un échec individuel, et d'améliorer les données sur les formes d'emprunt informelles, non garanties et ne permettant pas de constituer un patrimoine. |
| Keywords: | Household finance, Social protection, Poverty, Debt, Dette, Pauvreté, Protection sociale, Finance des ménages |
| Date: | 2026–02–09 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05500846 |
| By: | Pol Antràs; Adrian Kulesza |
| Abstract: | We develop a general equilibrium model of international trade in which the temporal structure of production is a key determinant of comparative advantage. Building on Böhm-Bawerk’s theory of capital, the model formalizes the idea that production processes with longer average periods of production (APPs) entail higher financing costs due to the time lag between input payments and revenue realization. We embed this insight into a multi-sector Ricardian framework with endogenous interest rates. Under autarky, countries with more patient consumers or more developed financial markets exhibit lower equilibrium interest rates and higher wage rates. With international trade, these countries typically gain a comparative advantage in sectors with longer APPs, though the model can also generate multiple equilibria and unconventional specialization patterns. We extend the framework to include trade costs (inclusive of shipment delays), global value chains, and international capital-market integration. Empirically, we present evidence showing that countries with more developed financial systems export disproportionately more in sectors with longer APPs, even after controlling for standard neoclassical and institutional determinants of comparative advantage. |
| JEL: | F1 F2 F3 F4 F6 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34983 |
| By: | Ferrari Minesso, Massimo; Lebastard, Laura; Bagur, Olga Triay |
| Abstract: | This paper provides the first causal estimate of the economic impact of interlinking payment systems across countries. We exploit a new dataset of payment systems interlinking initiatives, which identifies over 2, 000 connections, and employ standard gravity methods to estimate their impact on trade flows. Consistent with trade costs theory, we find that inter-connected countries have around 4% higher trade volumes, roughly half the effect of a trade agreement and a quarter of the effect of a common currency area. Our results isolate the average effect on trade, of directly connecting fast payment systems, net of country pairs already accessing the correspondent banking network. The estimated impact is larger for payment systems that allow wholesale transactions, those that link small countries, which, typically, are less connected to the correspondent banking network, and for geographical areas that face high cross-border payment costs. This suggests that the benefits from interlinking are derived from reduced cross-border trade costs. Our findings are causal – proved by parametric and semi-parametric estimators – and robust to numerous additional controls, including exclusion of the largest interlinked country group, the euro area. JEL Classification: E42, F15, F30 |
| Keywords: | fast payment systems, interlinking, trade |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20263202 |
| By: | Lorenz Emter; Laura Kuitunen; Arnaud Mehl; Peter McQuade; Swapan-Kumar Pradhan; Goetz von Peter |
| Abstract: | This paper examines asymmetries in the effects of geopolitical events on international bank credit, contrasting adverse events, such as the 2022 invasion of Ukraine, with positive events like the fall of the Berlin Wall in 1989. Using confidential data from the BIS International Banking Statistics from 1977 to 2024, we analyze credit dynamics between up to 12, 000 pairs of countries through the lens of their geopolitical differences. Our findings reveal that such differences impact international banking activity over time. Negative events reduce credit by 10-20% more between geopolitical blocs than they do within blocs. In contrast, positive events have no comparable effect on credit, even when boosting trade flows. We hypothesize that this asymmetry stems from the higher level of trust required for international bank credit compared to trade in goods, as the former involves a more pronounced intertemporal dimension, demanding a greater degree of commitment over time. |
| Keywords: | geoeconomics, geopolitics, international finance, global banking, residence, nationality, asymmetric effects, trust |
| JEL: | F2 F3 D74 H56 N40 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1338 |
| By: | Alfred Michel Nandnaba (UCA - Université Clermont Auvergne) |
| Abstract: | While armed conflict remains a major impediment to economic and political stability in developing countries, the potential role of digital financial inclusion, particularly mobile money, in mitigating violent conflict remains largely unexplored. This article examines the impact of mobile money adoption on armed conflict across 103 developing countries from 2000 to 2020, using the Entropy Balancing method to address selection bias. The findings show that mobile money significantly reduces violent conflicts, with an average decrease of 282 conflict-related deaths. These results remain robust across various sensitivity checks, including alternative model specifications, instrumental variable techniques to account for the reverse causality, and analyses of dynamic and spillover effects. The study also highlights important heterogeneity in the impact depending on the type of mobile money service, the country's level of development, the duration of the conflict, financial sector development, and geographic region. Moreover, it identifies key economic channels, including income, unemployment, inequality, and consumption volatility, through which mobile money contributes to the reduction of violent conflict. These findings underscore the strategic importance of digital financial services for promoting peace and fostering economic development in low- and middle- income countries. |
| Keywords: | Developing countries, Entropy Balancing, Mobile Money, Violent conflicts |
| Date: | 2026–03–05 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04566893 |
| By: | Lea Best; Benjamin Born; Manuel Menkhof |
| Abstract: | We study how firms’ investment responds to interest rate changes based on a German firm survey, combining hypothetical vignettes, open-ended questions, and rich firm data. We estimate a 7 percent semi-elasticity of investment to loan rates—about half the total corporate investment response to monetary policy shocks. Adjustment is heterogeneous: many firms do not react, citing cash buffers or a lack of opportunities, while adjusters revise sharply. Managers’ narratives about monetary policy transmission to investment emphasize direct borrowing-cost effects and rarely mention general-equilibrium channels. Local projections show this direct channel is central to output dynamics after monetary policy shocks. |
| Keywords: | Interest rates, firm investment, survey experiment, monetary policy, narratives, hurdle rates, aggregate investment |
| JEL: | D25 E43 E52 G31 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_737 |
| By: | Sugata Marjit; Suryaprakash Mishra; Sanghita Mandal; Mayukh Basu |
| Abstract: | Inequality of wealth or liquid finance in a system with credit market imperfection adversely affects investment by poor investors. This is well known in the literature. In this paper we prove that the aggregate credit demand function would be relatively inelastic with unequal wealth distribution as the average borrowing cost would be greater for people with lower endowment of self-owned capital. Hence, the supply side impact of monetary policy would have different impact on the rate of interest in markets with different degrees of inequality as measured by the elasticity of credit demand. Volatility of interest rate would be higher with greater inequality. For similar types of monetary policy, attaining policy targets would be relatively difficult in such markets. |
| Keywords: | inequality, monetary policy, capital flows, credit market |
| JEL: | D63 E43 E51 E52 F21 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12556 |
| By: | Budnik, Katarzyna |
| Abstract: | This paper maps the euro-area digital-banking segment and assesses how digital banks transmit monetary policy relative to brick-and-mortar peers. I compile a hand-checked universe of over 170 digital banks (2016–2025) from supervisory data, classifying institutions by business model (e-retail, e-service, e-wholesale). Digital banks are small on average yet growing fast, rely more on household deposits—predominantly overnight—and hold larger cash buffers and intangibles than traditional banks. Using a difference-in-differences design around the ECB tightening cycle that began in July 2022 and the initial 2024 easing. Three results stand out. (i) The funding channel is stronger and faster at digital banks in tightening: household deposit rates rise more and retail-funding spreads compress less, especially at overnight maturities and for stand-alone digital banks. Corporate-funding results are directionally similar but weaker and less robust. (ii) Loan-rate pass-through is not stronger, implying margin compression and a later slowdown in lending growth at digital banks despite continued retail inflows. Household deposits are markedly more rate-sensitive than corporate or unsecured funding. (iii) In early easing, digital banks cut new funding rates relatively quickly —particularly at longer maturities — yet effective deposit premia persist and retail inflows soften while margins begin to normalise. Policy implications concern the interaction of market digital adoption and banks’ capacity to adjust balance-sheet duration through the monetary cycle, along with financial stability. JEL Classification: E52, G21, E51, E43, E58, O3 |
| Keywords: | deposit competition, deposit rate pass-through, digital banks, ECB tightening cycle, household deposits, monetary policy transmission, neobanks, overnight deposits, retail funding |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20263206 |
| By: | Luis Araujo (Michigan State University and Sao Paulo School of Economics); Ryuichiro Izumi (Department of Economics, Wesleyan University); Fabrizio Mattesini (Universita di Roma, Tor Vergata, Italy) |
| Abstract: | We study how debt tradability in secondary markets affects efficiency and fragility. Motivated by fiat-backed stablecoins, we extend the Diamond-Dybvig framework by allowing a fraction of the issuer’s liabilities to be transferred to outside investors before the investment matures, while holders retain the option of redeeming with the issuer. Tradability improves efficiency by allowing the issuer to invest in less liquid, more productive investments. However, tradability has a non-monotone effect on fragility. When secondary markets are thin, tradability introduces self-fulfilling debt runs as an additional source of coordination failure, increasing fragility. Yet when secondary markets are sufficiently liquid, this additional source of coordination failure instead eliminates fragility altogether, as the issuer can meet all early redemptions from liquidation alone regardless of investor behavior. Thus, tokenizing demandable debts can decrease fragility although it in principle adds another source of coordination failure. Our results suggest that the designs of stablecoins, tokenized deposits, and tokenized MMFs should focus on ensuring sufficient depth in secondary markets. |
| Keywords: | bank runs, debt runs, tradable debts, stablecoins |
| JEL: | G21 G28 E42 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:wes:weswpa:2026-006 |
| By: | Aerts, Senne; Bindseil, Ulrich; Born, Alexandra; Brandi, Marco; Coste, Charles-Enguerrand; Deflorio, Anita; Delić, Eldin; Della Gatta, Daniela; Derviz, Alexis; Ferrari Minesso, Massimo; Fessler, Pirmin; Gati, Zakaria; Giammusso, Sara; Haslhofer, Bernhard; Kasimati, Agapi; Kochanska, Urszula; Koutrouli, Eleni; Lambert, Claudia; Manousopoulos, Polychronis; Marchi, Edoardo; Blazquez, María Cristina Molero; Nardelli, Matteo; Neugebauer, Katja; Nobili, Andrea; Painelli, Laura; Pantelopoulos, George; Paula, Georg; Raunig, Burkhard; Reinhold, Elisa; Rocco, Giorgia; Rubera, Eugenio; Saggese, Pietro; Schuster, Wagner Eduardo; Segalla, Esther; Siena, Daniele; Sigmund, Michael; Soemer, Nicolas; Zitan, Salim Talout; Theal, John; van der Kraaij, Anton; Weber, Beat; Abbassi, Maha; AlAsadi, Lala; Basilico, Eleonora; De Dhaem, Pauline Bégasse; Bewaji, Oluwasegun; Biancotti, Claudia; Gallardo, Carles Cerqueda; Cheliout, Sarah; Corio, Michele; Di Iorio, Alberto; Dziwok, Agata Magdalena; Feder, Marek; Ferraris, Giulia; Filippetta, Alice; Grau, Paul; Gugnani, Aayush; Gupta, Tarush; Heijmans, Ronald; Helal, Yosra; Iachini, Eleonora; Karanikolas, Georgios; Kelly, Conor; Kroon, Mauritia; Lauba, Andres; Määttä, Ilari; Makridis, Christos; Mastropietro, Ferdinando; Moscatelli, Mirko; Nogueira, Laura; Pinto, Diogo; Porubcanová, Petra; Rosset, Héloïse; Rossi, Teele; Salemans, Nico; Søndergaard, Rasmus Bobek; Teyssedre, Jean; Vassallo, Pietro; Wolff, Olivier; Ziaka, Lamprini |
| Abstract: | This paper provides an overview of analytical work conducted largely in 2025, under their own aegis, by experts from various European central banks and authorities in the field of crypto-asset monitoring and presented at the Crypto-Asset Monitoring Expert Group (CAMEG) 2025 Conference. Currently, risks stemming from crypto-assets and the potential implications for central banking and relevant authorities’ domains remain limited and/or manageable, also given the existing regulatory and oversight frameworks. Nevertheless, the importance of monitoring developments in crypto-assets, raising awareness of the potential risks and fostering analytical preparedness cannot be overstated. This paper offers a brief background of the 2025 activities of CAMEG, which brings together experts from the European System of Central Banks and the European Banking Authority. It also provides abstracts from various CAMEG and non-CAMEG papers and other analytical works presented at the conference held on 30 and 31 October 2025. The conference aimed to take stock of analytical work and data issues in the area of crypto-assets, while fostering European collaboration and monitoring in this field. Finally, this paper outlines the prospective way forward for CAMEG, focusing on gaining greater insight into data and deepening analytical work on interlinkages, crypto-asset adoption and the latest trends. JEL Classification: E42, G21, G23, O33 |
| Keywords: | crypto-asset data, crypto-asset risks, crypto-assets, monitoring |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbops:2026382 |
| By: | Maxime Malafosse (COACTIS - COnception de l'ACTIon en Situation - UL2 - Université Lumière - Lyon 2 - UJM - Université Jean Monnet - Saint-Étienne, FAYOL-ENSMSE - Institut Henri Fayol - Mines Saint-Étienne MSE - École des Mines de Saint-Étienne - IMT - Institut Mines-Télécom [Paris], Mines Saint-Étienne MSE - École des Mines de Saint-Étienne - IMT - Institut Mines-Télécom [Paris]); Amandine Pascal (LEST - Laboratoire d'Economie et de Sociologie du Travail - AMU - Aix Marseille Université - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | After the 2008 financial crisis, the role of money and the structure of modern monetary systems have become subject to renewed scrutiny. The existing system, marked by extensive financialisation, power concentration, and rising social inequality, is considered incompatible with social justice and ecological sustainability goals. Consequently, decentralised monetary initiatives have emerged as alternatives reshaping and rethinking the nature and governance of money. Of these initiatives, locally managed community currencies (CCs) have risen to prominence, as they view money as a commons designed to serve community needs rather than generate profit. However, the design and governance of CCs remain underdeveloped due to either too broad design principles or empirical insights lacking a theoretical foundation. This study proposes a structured set of design principles, which link theoretical insights to practical guidance. Drawing on a design science approach in a European project, we develop four actionable design principles that guide local communities in creating and adapting CCs to their respective socioeconomic contexts. By integrating insights from contemporary CC literature and practitioners' guidance research, this study offers a flexible yet structured toolkit for designing, deploying, and maintaining CCs. The framework emphasises the importance of balancing technological opportunities with community needs, ensuring the association of CCs with local realities and collective goals. This study helps redefine and design money as a democratic, socially embedded institution capable of fostering equity, resilience, and ecological transition. As such, it contributes to design science knowledge about solving the problem of societal and ecological transformation. |
| Keywords: | Community currencies, Commons, Design Science, Design principles, Blockchain technology, Local Complementray Currencies |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:emse-05520945 |