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on Monetary Economics |
| By: | Arisa Chantaraboontha |
| Abstract: | This paper examines the responses of foreign exchange rates to the Federal Reserve’s large-scale asset purchases (LSAP) and forward guidance (FWG) from 2009 to 2022. I confirm heterogeneous responses of examined foreign exchange rates to unconventional shocks, varying by magnitude and duration depending on the type of shock and monetary policy condition. Both shocks led to an appreciation of foreign currencies against the US dollar across all monetary policy regimes, except for the forward guidance (FWG) shock during the monetary policy normalization period, for which no statistically significant effect was observed. Over the course of the response horizon, the FWG shock had a greater impact magnitude on the examined foreign exchange rates than the LSAP shock. The effects of both unconventional shocks were more persistent during periods of zero lower bound (ZLB) on the policy interest rate than during normalization periods of monetary policy. However, the impact of such shocks on foreign exchange rates diminished within a couple of months, contrasting with the literature that finds more persistent effects. The implementation of variance decomposition reveals that the FWG shock had a significantly greater influence on foreign exchange rate variation than the LSAP shock, emphasizing the importance of effective guidance communication to the markets. |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:dpr:wpaper:1276r |
| By: | Barbon, Andrea; Barthélemy, Jean; Nguyen, Benoît |
| Abstract: | Does the Federal Reserve’s monetary policy influence the rates on USD-pegged stablecoins? While major stablecoin issuers do not pay interest, investors can earn returns by depositing stablecoins in Decentralized Finance (DeFi) protocols. We document unusually large and persistent spreads between traditional short-term interest rates and DeFi deposit rates, as well as a weak and unstable transmission of policy rate changes. We show that, in the short run, monetary policy shocks can move stablecoin rates in the opposite direction of policy rates, delaying a convergence that occurs only over the medium run. Both the sign of the short-run effect and the speed of convergence depend on the intensity of deleveraging induced by crypto-price reactions relative to the standard interest-rate arbitrage channel — an effect shaped by investors’ limited ability to bridge traditional and decentralized finance. JEL Classification: G14, G23, G29 |
| Keywords: | crypto, DeFi, stablecoin |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20263280 |
| By: | Varela Garcia, Nicolas |
| Abstract: | The development of a modern interbank money market in Spain as a mechanism of liquidity redistribution and a channel of monetary policy transmission dates back to the monetary reforms of the early 1970s. However, Spanish banks recorded traditionally substantial interbank positions. Did the system of interbank relationships play any role in liquidity management before the creation of a proper market? To answer this question, I assembled monthly data about interbank assets and liabilities of Spanish private banks, both at aggregate and bank level, from primary sources from the mid-1950s to the early 1970s. Aggregate data are based on the Statistical Bulletin of theBank of Spain, published since March 1960. Bank-level data have been hand-collected from monthly balance sheets reported by individual banks to the Bank of Spain. These balance sheets, available at the Historical Archive of the Bank of Spain, are used here for the first time for historical research. In the paper I analyze the rising relevance of interbank positions, both domestic and international, between the 1960s and theearly 1970s. I also explore the characteristics and use of interbank positions in a sam-ple of private banks for the period 1954-1969. For that purpose I calculate a set ofindicators that re ect di erences across banks in terms of net position, the share of interbank over total assets, the relevance of interbank liabilities as a source of funding, and the existence of dominant positions in interbank relationships. Finally I test empirically the response of interbank positions to contractionary monetary policy shocks in a cross-section of private banks. The results suggest differential effects depending on the monetary instrument used for policy purposes, the type of banks and their liquiditysituation. |
| Keywords: | Interbank market; Monetary policy; Bank liquidity; Francoist Spain |
| JEL: | E51 E52 G21 N14 |
| Date: | 2026–09–15 |
| URL: | https://d.repec.org/n?u=RePEc:cte:whrepe:50765 |
| By: | Schwind, Patrick; Weinand, Sebastian |
| Abstract: | In the euro area, inflation is measured by the Harmonised Index of Consumer Prices (HICP). Contributions of specific products to the overall inflation rate are derived by what is known as the Ribe approach. While this approach can be applied to the monthly HICP indices, it cannot be used for the annual HICP averages published by statistical offices, nor can it be used to calculate contributions to inflation over multiple years. This paper develops a generalization of Ribe's approach that overcomes both limitations. For annually chain-linked Laspeyres-type indices and their quarterly and annual averages, the proposed method allows contributions to price changes to be derived over arbitrary time periods. The resulting contributions consistently sum to the overall price change. As such, the method provides a useful tool for long-term monetary policy analysis. An application to HICP data shows that services have been the main driver of inflation in the euro area since 2002. |
| Keywords: | chain index, HICP, inflation measurement, Ribe approach |
| JEL: | E31 C43 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:bubtps:343533 |
| By: | William Pagel (University of Oxford and Bank of England) |
| Abstract: | What is the socially optimal long-run size of the central bank balance sheet, once interest rates are away from the effective lower bound and the balance sheet is no longer needed for monetary stimulus? I introduce a central bank into a model in which banks are liquidity mismatched and prone to sudden ‘bank runs’. Supplying central bank reserves reduces the likelihood and severity of runs, but comes at a cost: constraints on the set of securities the central bank can hold mean a larger balance sheet crowds out private investment and misallocates capital. I calibrate the model to pre-financial crisis conditions and empirical estimates of the non-linear reserve demand curve, and compute optimal policy. Under full information, it is optimal to expand reserve supply to the point where reserve demand is satiated, but no further. However, because under-supplying reserves is more costly than over-supplying them, robustness to parameter uncertainty calls for an additional buffer in reserve supply. But even for high degrees of robustness, the buffer needed is no larger than two and a half percentage points of bank assets. The policy prescription remains restrained: robustness moves the balance sheet modestly beyond satiation, but fails to justify an open-ended provision of abundant reserves. |
| Keywords: | Reserve supply;central bank reserves;optimal policy;bank runs |
| JEL: | E44 E52 E58 G21 |
| Date: | 2026–08–28 |
| URL: | https://d.repec.org/n?u=RePEc:boe:boeewp:023578 |
| By: | Kristen Payne; Mary-Frances Styczynski |
| Abstract: | The money supply is defined as a group of safe assets with stable values that households and businesses can use to make payments or to hold as short-term investments. In the U.S., the Federal Reserve measures the money supply using officially defined monetary aggregates, which classify assets according to their liquidity and function—a store of value versus a medium of exchange. |
| Date: | 2026–09–04 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfn:103750 |
| By: | Sriya Anbil; Alyssa G. Anderson; Lucy Cordes; Romina Ruprecht |
| Abstract: | As the Federal Reserve (Fed) navigates periods of balance sheet expansion and reduction, it has become increasingly important to understand how changes in the size and composition of Fed assets affect short-term funding markets. The overnight Treasury repo market is central to this relationship since it is a transmission channel through which balance sheet policy can affect money market conditions and, ultimately, the Fed's policy rate, the effective federal funds rate (EFFR). |
| Date: | 2026–08–26 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfn:103714 |
| By: | Alexis Stenfors (University of Portsmouth, UDST - University of Doha for Science and Technology); Mimoza Shabani (Audencia Business School); David Gabauer (Lincoln University [Nouvelle-Zélande]); Jan Toporowski (LSE - London School of Economics and Political Science) |
| Abstract: | This study investigates the domestic transmission of inflation by examining how price dynamics interact within the Consumer Price Index (CPI) in the US, the UK, and Japan over the period January 1988 (January 1993 for the US) to March 2025. Using a time-varying parameter vector autoregression (TVP-VAR) connectedness framework, we quantify the extent and evolution of inflation interdependencies across disaggregated price series. The results show that inflation is driven not only by external shocks and policy conditions but also by endogenous interactions within the price system. Inflation transmission remains moderate on average but intensifies during periods of elevated inflation, indicating stronger propagation of price pressures. Fiscal interventions, such as Japan's consumption tax increases, generate sharp but short-lived increases in transmission. Finally, we document a decline in inflation transmission over time, consistent with increased global integration and trade openness. These findings demonstrate that aggregate inflation measures overlook important internal dynamics. |
| Keywords: | JEL classification: C81 D43 E31 E52 Consumer price index Inflation components Dynamic connectedness Inflation targeting Monetary policy |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05694957 |
| By: | Aydin Yakut, Dilan (Central Bank of Ireland); Byrne, David (Central Bank of Ireland); Goodhead, Robert (Central Bank of Ireland) |
| Abstract: | A large literature on monetary policy transmission has emphasised many potential non-linear drivers. Transmission strength has been shown to vary with the business cycle, financial frictions, and uncertainty, amongst other mechanisms. However, most studies focus on a small number of channels at a time. Our study takes a “big data†approach to non-linearity, allowing us to rank the relative importance of a wide range of non-linear transmission channels. We focus on asset price responses to central bank statements. Using a large, mixed-frequency macro-financial dataset, we show that US monetary policy surprises feature a small number of important non-linear drivers, relating especially to financial variables. Monetary transmission to long-term interest rates is weaker at times of high interest rates and high credit growth, consistent with diminishing effectiveness over a hiking cycle. While non-linearity over the interest rate cycle appears to dominate other channels, we find some evidence that monetary policy is weaker in booms. Using euro area data, we find a prominent role for sovereign risk in state-dependent transmission. |
| Keywords: | Monetary policy, state-dependence, non-linearity, event study, big data. |
| JEL: | E52 C32 C11 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:cbi:wpaper:09/rt/26 |
| By: | Scalone, Valerio; Tenreyro, Silvana |
| Abstract: | How does the effectiveness of monetary policy vary over the policy cycle? Do tightenings and loosenings have symmetric effects on the macroeconomy? This paper addresses these questions using a nonlinear empirical framework that allows financial exposure to evolve endogenously in response to macroeconomic conditions and monetary policy changes. We provide new evidence on how monetary policy effectiveness varies over the policy cycle and across economic states. We find that i) monetary policy transmits more strongly to the real economy in periods of elevated private-sector financial exposure; ii) tightening cycles increase financial exposure in the short run, which in turn amplifies the effect of further interest rate increases, whereas loosening cycles lower financial exposure, increasingly dampening the effect of interest rate cuts; iii) tightening during economic downturns further intensifies debt-servicingpressures, making monetary policy even more potent; instead, when the tightening occurs during expansions, monetary policy effectiveness is not materially affected. JEL Classification: E3, E44, G01, G21 |
| Keywords: | monetary policy, monetary policy transmission, non-linear models |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20263281 |
| By: | Hüttl, Pia; Ider, Gökhan; Kaldorf, Matthias |
| Abstract: | Central bank collateral policy specifies which assets banks can pledge as collateral to obtain central bank funding and is an important determinant of liquidity in the banking system. We propose a high-frequency identification approach to study the systematic effects of central bank collateral policy on banks, financial markets, and asset prices. We identify collateral policy surprises using intraday bank stock price changes around Eurosystem collateral policy announcements. Expansionary collateral policy surprises lead to excess returns of bank stocks, a decline in common volatility measures, and a reduction in bank default risk, in particular for riskier banks. They also compress core-periphery government bond spreads, even for policy changes that are unrelated to the collateral treatment of government bonds. The uneven transmission of collateral policy through banks to sovereign bond markets is distinct from both central bank asset purchases and conventional monetary policy. |
| Keywords: | Central Bank Collateral Framework, Bank Stocks, Government Bond Market, High Frequency Identification, Intermediary Asset Pricing |
| JEL: | E44 E58 G12 G21 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:bubdps:343110 |
| By: | Krüger, Jacqueline; Dinger, Valeriya |
| Abstract: | This paper examines how inflation expectations relate to household saving behavior across saving categories. We apply a generalized ordered logit model to survey data from 4, 824 German households during a high inflation period (March 2023). We find that income and precautionary motives dominate substitution effects: higher inflation expectations are associated with maintaining or increasing overall savings. Our disaggregated analysis reveals a non-linear threshold effect - only households with strongly elevated inflation expectations exhibit economically significant be- havioral responses, consistent with flight-to-liquidity behavior toward cash. De- composing saving shifts by inflation expectation level reveals further heterogeneity: the cash-bond substitution documented in the full sample is driven exclusively by low inflation expectation households, while high inflation expectation households accumulate both instruments simultaneously, reflecting broad portfolio expansion rather than reallocation. We further find that only dynamic - not static - infla- tion expectation formation is associated with behavioral responses. These findings have ambiguous implications for bank funding stability. |
| Keywords: | Saving behavior, Households, Deposits, Saving shifts, Financial Stability |
| JEL: | E31 G21 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:bubdps:343043 |
| By: | Per Asberg-Sommar; Mathias Drehmann; Denise Hansson; Vatsala Shreeti |
| Abstract: | What determines banks' demand for holding reserves at the central bank overnight? This has become a critical question for central banks that are shrinking their balance sheets. We exploit the unique operational framework in Sweden and quantify the factors that drive banks' demand to hold excess reserves at the central bank. Using granular data, we document significant fragmentation in interbank markets with a set of banks that never trade in interbank markets (inactive banks) and others that do (active banks). Active banks' excess reserves increase with their payment flow volatility and the cost of borrowing in interbank markets. Furthermore, excess reserve holdings shrink when aggregate interbank activity is high. Inactive banks' excess reserves also increase with their payment flow volatility but show greater persistence over time, underlining their passivity. Our findings not only shed light on the bank-level drivers of excess reserve demand but also on likely dynamics in untested demand-driven floors. |
| Keywords: | excess reserves, reserve demand, interbank markets, demand-driven floor |
| JEL: | E41 E58 E52 G21 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1376 |
| By: | Krüger, Ulrich; Wong, Lui Hsian |
| Abstract: | The introduction of a digital euro (D€) would allow euro area residents to exchange bank deposits for digital currency, thus offering an efficient addition to the European payment sector. It is currently being discussed how the D€ impacts liquidity outflows from banks and financial stability. To mitigate these risks, the European Commission's legislative proposal permits the ECB to impose limits on the use of the D€ as a store of value. This study contributes to the calibration of appropriate holding limits for a D€. We examine how banks adjust their liquidity buffers and funding structures in response to the D€. We explore banks' potential strategies to minimise funding costs, including raising deposit rates and expanding wholesale funding, and approximate a market equilibrium. Applying our model to the German banking system, we find that imposing a holding limit of €3, 000 would reduce the return on equity by approximately 0.2 percentage points and the Liquidity Coverage Ratio by about 7 percentage points in the most adverse scenario. These findings suggest that the long-term impact remains relatively contained. |
| Keywords: | Central Bank Digital Currency, Digital Euro, Holding Limit, Liquidity, Funding Costs, Financial Stability |
| JEL: | G21 G32 G38 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:bubdps:343079 |
| By: | Marlow, Joe (Central Bank of Ireland); Aydin Yakut, Dilan (Central Bank of Ireland) |
| Abstract: | This insight introduces a toolkit that integrates national-level macroeconomic, survey, commodity, and financial data to provide timely estimates of headline HICP inflation in the euro area. The toolkit is updated on a weekly basis and provides detailed breakdowns of how new data flows drive nowcast revisions, enabling transparent and informed policymaking. The model successfully identifies evolving inflationary pressures through frequent updates, as demonstrated by the March 2026 case study of energy price-driven inflation. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:cbi:stafin:10/si/26 |
| By: | Woodgate, Ryan |
| Abstract: | This paper advances post-Keynesian conflict inflation theory in four main ways. First, it resolves a longstanding ambiguity surrounding the speed-of-adjustment parameters in conflict inflation models. It is argued that these parameters reflect the costs of adjusting wages and prices, and the existence of staggered contracts. Second, drawing on this reinterpretation, we show how indexation can be formally incorporated into the Generalised Conflict Inflation Model (Woodgate, 2026), meaning that both inflation expectations and indexation explicitly feature in the same model-a novelty among conflict inflation models. Third, adopting a stochastic staggered contracts interpretation, we show this extension implies distributions of real wages among cohorts of workers and firms in equilibrium, with dispersion widening at higher rates of steady-state inflation. Fourth, we argue that rather than simply suffering this erosion of real income, workers and firms raise the degree of indexation and reset frequency over the long run as trend inflation rises, and show that the resulting shorter effective contract durations, while protecting real incomes, lower the degree of distributional conflict required to trigger hyperinflation. |
| Keywords: | Inflation, distribution, rigidities, stability, hyperinflation |
| JEL: | D33 E31 E12 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ipewps:343589 |
| By: | Vegard H. Larsen; Leif Anders Thorsrud |
| Abstract: | Central banks publish projection paths, but these need not be optimal summaries of the information used to form them. We reframe conditional macroeconomic forecasting as an input problem: a fixed, pre-trained multivariate foundation time-series model reads the institution's historical predictions and announced future paths alongside target histories, rather than imposing the path as a model-consistent restriction inside a locally estimated system. The mapping nests the Mincer-Zarnowitz and Granger-Ramanathan regressions as its parametric-linear special case. Reading just Norges Bank's published path triple and target histories, the map cuts mean squared error against the Bank on inflation across horizons, and the nested combination regression puts the conditional weight on the map, not the path. A hard-conditioned VAR matched on the same future paths, but blind to the prediction record, is consistently outperformed on the rate and inflation, and the result survives the asymmetric-loss specifications that best rationalise the path. The VAR contrast replicates on Sweden and New Zealand; the institutional comparison only on New Zealand, with parity at best on Sweden. An institutional-learning regression rationalises the split: the Riksbank absorbs its recent misses more aggressively than Norges Bank and the RBNZ, leaving less residual signal to extract. |
| Keywords: | foundation models, conditional forecasting, central bank forecasts, information efficiency, Chronos-2 |
| JEL: | C53 E37 E47 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12972 |
| By: | Mihai-Vasile Cîrja (Banca Nationala a României); Jordi Romeu Granados (Banco de España) |
| Abstract: | Central banks and financial supervisory authorities make decisions that affect people, markets and the economy as a whole. Although legitimacy and public trust in public institutions generally depend on their ability to explain what they do, why they act and how they can be held to account through transparent and accountable governance, these considerations are especially important for central banks and financial supervisory authorities. Given their independence from day-to-day political direction and the limited direct political oversight to which they are subject, openness, effective communication and meaningful stakeholder participation play a critical role in maintaining their credibility and democratic legitimacy. Building on this premise, this paper examines the role of transparency and accountability in shaping institutional culture, strengthening legitimacy and fostering trust in this type of independent authority. While a substantial body of literature has examined transparency in specific policy areas, particularly monetary policy and financial stability, this paper adopts a broader governance perspective. It explores how national central banks and national competent authorities promote openness, communicate with stakeholders and the wider public and remain accountable in their day-to-day activities. In this context, transparency is understood not merely as the disclosure of information, but as a core governance function that underpins effective communication, meaningful public engagement and robust accountability arrangements. The analysis combines theory with comparative evidence from a structured questionnaire answered by 30 institutions in EU Member States and five institutions from non-EU jurisdictions. The questionnaire covered legal frameworks, internal arrangements, communication practices, access to information, participation mechanisms and accountability relationships. The findings show that transparency is increasingly more than a legal obligation to publish information. Most participating institutions go beyond minimum legal requirements by publishing additional material, using digital channels, adapting messages to different audiences, supporting financial literacy and creating opportunities for public engagement. At the same time, accountability is shown to operate through a multilayered set of relationships, including reporting duties, parliamentary and audit oversight, review and complaint mechanisms, public explanation and feedback channels that connect institutions both to formal oversight bodies and to society. The study also identifies areas where progress remains uneven, including the evaluation of transparency after publication, the measurement of communication effectiveness, and the transparency of processes supported by artificial intelligence. It concludes that transparency and accountability can drive institutional change when they are embedded in strategy, communication, internal governance, oversight and evaluation. The paper proposes a framework of good practices and a maturity index to help institutions move from compliance-driven transparency towards a more trust-based, evaluative and citizen-oriented approach to accountability, while preserving their independence. |
| Keywords: | central banks, financial supervisory authorities, transparency, accountability, institutional independence, communication, public information, citizen participation |
| JEL: | E58 G28 H11 H83 D73 K23 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:bde:opaper:2617e |
| By: | Aydan Dogan; Ozgen Ozturk |
| Abstract: | We study how the financing of innovation shapes the transmission of monetary policy to productivity. Using US firm balance-sheet data matched to loan contracts, we show that contractionary monetary policy shocks reduce cash flow similarly across firms but lower R&D more among those without access to cash flow-based borrowing, where credit is extended against earnings rather than collateral. In a New Keynesian endogenous growth model with heterogeneous access to external finance, we show that a 25 basis point tightening lowers output persistently by 0.12%. Extending access to all firms reduces this loss by one third. The loss falls disproportionately on firms without access, which are younger and produce more and higher-quality patents. |
| JEL: | E22 E32 E44 E52 G32 |
| Date: | 2026–09–04 |
| URL: | https://d.repec.org/n?u=RePEc:boe:boeewp:023581 |
| By: | Colin Weiss |
| Abstract: | In 2025, world international reserves held in gold surpassed foreign official holdings of U.S. Treasury securities (figure 1), a fact drawing attention from media and policymakers (Nangle, 2025; European Central Bank, 2026; Storbeck and Hook, 2026, for example). Should this be interpreted as gold overtaking U.S. Treasury securities in its appeal as a reserve asset? I argue that the answer is no, as a comparison of world gold reserves and aggregate foreign official holdings of U.S. Treasury securities is problematic for a couple reasons. |
| Date: | 2026–09–03 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfn:103747 |
| By: | Olivier Gu\'eant |
| Abstract: | This text grew out of a historical introduction initially written for a study of interest rates in cryptocurrency markets. The difficulty of defining a term structure for a currency without a conventional bond market led naturally to a more fundamental question: under what historical conditions does a yield curve become observable at all? Credit existed long before modern money, and interest-bearing loans are documented as early as ancient Mesopotamia. For much of history, the surviving evidence lacks the institutional features that facilitate reliable comparisons of interest rates by maturity: standardised debt instruments, sufficiently homogeneous borrowers, regular issuance over a range of maturities, observable market prices, and liquid secondary markets. We trace the gradual emergence of these conditions from ancient Mesopotamia, Greece, and Rome, through medieval and early modern Europe, to the development of modern sovereign debt markets in the nineteenth and twentieth centuries. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.07958 |
| By: | Goodhart, Charles (London School of Economics and CEPR); Peiris, M. Udara (Department of Economics, Oberlin College); Tsomocos, Dimitrios (University of Oxford); Wang, Xuan (Vrije Universiteit Amsterdam and Tinbergen Institute) |
| Abstract: | Corporate borrowing creates safe claims for some households and concentrates residual risk in equity for others. This portfolio heterogeneity drives a supply-side channel through which corporate leverage conditions monetary transmission. Tightening erodes equity holders’ wealth while safe-asset holders are cushioned; the resulting income effect makes aggregate labor fall more at high leverage, raising the sacrifice ratio. A static model yields a closed-form hump in leverage, with the US range on the rising side, disciplined by Survey of Consumer Finances portfolio shares. A calibrated dynamic model roughly doubles the sacrifice ratio, and US local projections agree in sign, shape, and timing. |
| Keywords: | Household heterogeneity, Monetary policy, Corporate leverage, Phillips curve, Labor supply |
| JEL: | E31 E32 E52 G11 G51 |
| Date: | 2026–06–30 |
| URL: | https://d.repec.org/n?u=RePEc:cxv:wpaper:2602 |
| By: | Jeremy Bertomeu; Xiumin Martin; Ibrahima Sall |
| Abstract: | Decentralized finance (DeFi) lending has grown from nonexistent in 2017 to nearly 40 billion US Dollars in deposited funds in May 2022. Using cryptocurrency as collateral, the platforms match speculative margin trading with yield-seeking depositors lending coins pegged to the dollar (stable coins). Depositors receive claims guaranteed by a basket of collateral, akin to new stable coins. We develop a framework requiring only knowledge of aggregate deposits and borrowings to measure overall system risks to lenders and borrowers. Using evidence from major protocols, the measures identify an increase in system fragility beyond prudent levels around mid 2021, with a potential loss of peg for extreme variations in coin prices. Overall, the model offers an easily implementable aggregate risk metric capturing the perspectives of synthetic investors and offers early warning signals as the industry is moving from deposits guaranteed by collateral to fiat money. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.07902 |
| By: | Matthew Read |
| Abstract: | Sign restrictions on the slopes of supply and demand curves are often used to identify historical decompositions in structural vector autoregressions. I show that the identifying power of these restrictions depends on both reduced-form parameters and realised forecast errors. Consequently, unlike many other structural objects, the strength of identification cannot be assessed from reduced-form parameters alone. Empirically, identified sets for historical decompositions of US inflation are typically largely uninformative, both in aggregate and in most expenditure categories. Existing inflation decompositions are therefore sensitive to auxiliary assumptions used to select among observationally equivalent models. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.06907 |
| By: | Elena Falcettoni |
| Abstract: | One of the goals of the Federal Reserve has always been the promotion of a safe and efficient payments system, and it consistently fosters such an environment by playing multiple, simultaneous roles, including as a supervisor of banks and financial market utilities, as an operator of payments services within the industry, and as a catalyst for payment system improvements. |
| Date: | 2026–08–26 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfn:103713 |
| By: | Carin van der Cruijsen; Nicole Jonker |
| Abstract: | In an increasingly digital retail payments landscape, it is essential that households are well prepared for incidents that temporarily disrupt their ability to make digital payments for everyday purchases. This study examines whether Dutch households are prepared for such disruptions and whether official preparedness advice has translated into recommended behaviour. We use survey evidence from 5, 672 Dutch respondents collected after the May 2025 official recommendation to hold €70 per adult and €30 per child in cash for a 72-hour outage of electronic payments and to maintain multiple means of payment. Awareness is high, but incomplete: 71% of respondents know the cash recommendation, while 58% hold the recommended amount or more. This implies a preparedness gap, especially among financially constrained households. Awareness is strongly associated with compliance; respondents who know the advice are 21 percentage points more likely to meet it. Non-compliance appears partly behavioural rather than purely informational or financial; the most frequently cited reason is not having got around to following the advice. Our analysis of several events, including communication about the cash advice, suggests that targeted communication may support compliance with the cash advice. Digital fallback capacity is more widespread than cash fallback preparedness, with 70% of respondents having multiple digital payment instruments for point-of-sale purchases. The findings imply that resilience policies should not only safeguard payment infrastructure but also address the informational, behavioural and practical barriers that prevent households from preparing. |
| Keywords: | payment disruptions; consumer preparedness; cash holdings; digital payments; advice compliance; payment resilience |
| JEL: | D12 D14 D91 E42 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:dnb:dnbwpp:869 |