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on International Finance |
| By: | Iñaki Aldasoro; Paula Beltrán; Federico Grinberg |
| Abstract: | Using data on four USD-pegged stablecoins and 27 fiat currencies, this paper documents spillovers from stablecoin-based foreign exchange (FX) to traditional FXmarkets. We document a gap between the cost of acquiring dollars via stablecoins and via the spot FX market (parity deviations). To establish a causal link between stablecoin flows and FX markets, we use a granular instrumental variable that exploits idiosyncratic shocks to stablecoin net inflows in other currencies. Our estimates indicate that a 1% exogenous increase in net stablecoin inflows raises parity deviations by 40 basis points, depreciates the local currency, and widens the dollar premium in synthetic funding markets (covered interest parity (CIP) deviations). A model of constrained arbitrage rationalizes these findings and provides structural foundations for the identification strategy. Counterfactual simulations show that halving cross-market frictions would attenuate CIP spillovers by roughly one-half and cut exchange rate effects by nearly one-third. A dynamic extension that closely matches the empirical impulse responses shows that spillovers grow disproportionately when intermediaries suffer losses, as depleted capital reduces their capacity to absorb further shocks. Our results establish stablecoins as an emerging segment of global currency markets with direct implications for financial stability. |
| Keywords: | stablecoins, foreign exchange, market segmentation, capital flows, arbitrage |
| JEL: | F31 G15 G12 G23 F38 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1340 |
| By: | Wenxin Du; Ritt Keerati; Jesse Schreger |
| Abstract: | We document a strong decoupling between the convenience yield on the U.S. dollar and U.S. Treasuries. We measure the convenience of the U.S. dollar using covered interest parity (CIP) deviations between risk-free bank rates, such as secured overnight rates since the benchmark reform. In parallel, we measure the convenience of U.S. Treasury bonds through CIP deviations between government bond yields. We find a pronounced divergence between the two convenience measures in recent years: while the U.S. dollar exhibits strong convenience post-Global Financidecoupal Crisis, the U.S. Treasury convenience has not only declined substantially but has turned negative, most strongly so at medium- to long-term maturities. We argue that the relative supply of government bonds between the US and other developed markets is a key driver of the U.S. Treasury convenience compared to other government bonds. Finally, we present a simple framework with a constrained global financial intermediary to link dollar and Treasury convenience. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35000 |
| By: | Frangiamore, Francesco; Saadaoui, Jamel |
| Abstract: | Using local projections, this paper documents that neither global geopolitical risk (GPR) shocks nor GPR shocks originating in smaller euro area countries have a significant impact on Euro Area sovereign stress, whereas GPR shocks originating in Germany generate sizable effects, against the backdrop of the recent surge in geopolitical risk following the Russian invasion of Ukraine. |
| Keywords: | Geopolitical Risk, Sovereign Stress, Local Projections. |
| JEL: | E44 F51 G01 |
| Date: | 2026–01–26 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:127823 |
| By: | Farina, Tatiana; Franke, Günter; Heider, Florian; Krahnen, Jan Pieter; Subrahmanyam, Marti G. |
| Abstract: | This SAFE White Paper presents a structured economic framework for assessing asset-backed stablecoins in their capacity as privately issued, fiscally anchored monetary instruments. Specifically, we evaluate the implications of stablecoins for financial intermediation, sovereign debt markets, and monetary transmission while devoting particular attention to differences between the United States and European Union. To this end, we characterize the basic economics of stablecoins by comparing their balance-sheet structure to narrow banks, money market funds, commercial banks, and central banks, highlighting that issuers engage in minimal maturity transformation and hold predominantly high-quality liquid assets against par-redeemable digital liabilities. Furthermore, we examine the regulatory design of the US GENIUS Act and the EU's MiCAR framework, showing how differences in reserve composition and supervisory architecture shape incentives for regulatory arbitrage and influence whether stablecoin growth reallocates existing sovereign debt holdings or generates net additional demand. For the euro area, the central question is whether digital liquidity remains anchored in domestic sovereign assets or shifts toward foreign-currency stablecoins, with implications for monetary sovereignty and financial stability. We conclude that Europe requires an active response: advancing a digital euro, strengthening global supervisory coordination, and reinforcing cross-border AML enforcement in public blockchain environments to safeguard monetary sovereignty and financial stability. |
| Keywords: | Stablecoins, treasury markets, digitial currency |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:safewh:339581 |
| By: | Ali Kakhbod; Amir Kermani; Bernardo Maciel |
| Abstract: | Does the Federal Reserve react to all inflation equally? We systematically analyze FOMC meeting records from 1937 to 2025 to construct meeting-level measures of the Fed’s real-time attribution of inflation to demand and supply pressures. We document substantial variation in these narratives over time and show that, since Volcker, the Fed has responded more aggressively to perceived demand-driven inflation. Consistent with this asymmetry, supply pressures have more persistent effects on realized inflation, while demand pressures' impact dissipates quickly. Financial markets also reflect this distinction: demand imbalances primarily move risk-neutral yields, whereas supply imbalances raise term premia and equity risk premia. |
| JEL: | E31 E43 E52 E58 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35016 |
| By: | Koichiro Kamada (Faculty of Business and Commerce, Keio University) |
| Abstract: | We propose a simple method for estimating multiple natural rates in a system of simultaneous equations. Our estimators of natural rates are closely related to the HP filter and accessible by many practitioners. As an application, Japan’s potential output and natural foreign exchange rate are estimated. It is shown that Japan’s potential output has been growing, but the natural foreign exchange rate has experienced stepwise downward shifts since the beginning of the 21st century. While Japan suffered the long-lasting stagnation, emerging markets, particularly China, achieved tremendous economic growth. The declines in the natural foreign exchange rate indicate Japan’s lost competitiveness in the world economy clearly. |
| Keywords: | Phillips curve, net export, potential output, output gap, exchange rate, productivity, international competitiveness, HP filter |
| JEL: | C13 C32 E31 E32 F14 F41 O47 |
| Date: | 2026–03–18 |
| URL: | https://d.repec.org/n?u=RePEc:keo:dpaper:dp2026-005 |
| By: | Etienne Farvaque; Jean-Baptiste Gossé; Camille Jehle |
| Abstract: | Households across European Union regions face diverse economic shocks impacting wage income and welfare. Understanding the channels through which households adjust their income is crucial for assessing regional resilience. Here we analyze regional (NUTS2) data from 2000 to 2020, decomposing income smoothing into public transfers, property income, self-employment and housing income, and demographic changes. We find that approximately 30% of wage shocks are smoothed in the EU, rising to more than 40% in the euro area and 60% in Western Europe, with transfers and self-employment/housing income as the primary adjustment mechanisms. Property income plays a strong role in Western Europe, particularly during recessions, while migration contributes modestly but significantly to smoothing in Southern and Western Europe. Our analysis reveals distinct regional patterns, delineating core, semi-peripheral, and peripheral groups with varying smoothing capacities. These findings highlight substantial regional heterogeneity in income adjustment, underscoring the multi-speed nature of economic integration and the importance of tailored policies to enhance household resilience across Europe. |
| Keywords: | Risk-Sharing, Income Smoothing, Currency Unions, Migration |
| JEL: | C32 E31 E32 E44 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:bfr:banfra:1037 |
| By: | Antoine Camous; Eric Monnet; Damien Puy |
| Abstract: | A new 70-year dataset of world macroeconomic cycles reveals that the growing synchronisation of world economies mainly concerns asset prices. In contrast, the global synchronisation of variables such as GDP and credit remains low. Indeed, this “decoupling” has widened since the global financial crisis. We draw lessons from this for the conduct of public policies. <p> Une nouvelle base de données macroéconomiques internationales sur 70 ans permet d’établir que la synchronisation croissante des économies mondiales concerne surtout les prix des actifs. Des variables telles que PIB et crédit restent faiblement synchronisées au niveau mondial. Ce "découplage" s’est même accentué après la crise financière mondiale. Nous en tirons des enseignements pour la conduite des politiques publiques. |
| Date: | 2026–03–03 |
| URL: | https://d.repec.org/n?u=RePEc:bfr:econot:437 |
| By: | Adel, Niloofar; Bastianin, Andrea; Pedini, Luca; Visconti, Marta |
| Abstract: | We quantify the contribution of Venezuela’s oil sector collapse to changes in global oil market responsiveness after 2007. We extend the multi-country structural model of Baumeister and Hamilton (2024) by modeling Venezuela explicitly and constructing a counterfactual production path that abstracts from the 2007 institutional shift. This counterfactual isolates the mechanical contribution of Venezuelan supply and provides an upper bound on its impact. We document a sharp decline in global short-run supply elasticity and a more than doubling of the oil price multiplier after 2007. Decomposition results show that this increase is driven primarily by a reduction in the effective inventory-related adjustment margin, with changes in other producers’ supply elasticities accounting for most of the remainder. By contrast, Venezuela’s contribution through its production share and contemporaneous supply elasticity is small. Restoring Venezuelan output raises global supply elasticity modestly but has limited effects on price amplification. |
| Keywords: | Environmental Economics and Policy, Resource/Energy Economics and Policy |
| Date: | 2026–03–31 |
| URL: | https://d.repec.org/n?u=RePEc:ags:feemwp:396389 |
| By: | Emanuele Brancati; Qingqing Cao; Raoul Minetti; Nicholas Jaehyun Yi |
| Abstract: | We study how the integration between the financial sector and the production structure influences business cycle transmission. In a dynamic economy where banks provide assetbased finance to supply chains, we find that integration along an extensive margin, in the form of firms’ ability to borrow from banks specialized in different supply chain segments, amplifies negative banking shocks. In contrast, integration along an intensive margin, in the form of greater diffusion of bank factoring and invoice discounting, mitigates the transmission of banking shocks. A quantitative application to Italy reveals that the destabilizing effects of bank-supply chain integration can prevail when inter-firm commercial linkages are underdeveloped. The predictions are consistent with bank-firm matched data from Italy. |
| Keywords: | Banks; Financial integration; Production networks; Factoring |
| JEL: | E23 E32 E44 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:sap:wpaper:wp278 |