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on Monetary Economics |
| By: | Stournaras, Yannis |
| Abstract: | This paper revisits the evolving mandates of central banks in light of recent economic disruptions and structural shifts. Drawing on historical lessons from the Great Inflation and the Global Financial Crisis, it highlights the importance of price stability and central bank independence as foundational principles. The analysis focuses on the European Central Bank's (ECB) updated monetary policy strategy, emphasizing its mediumterm orientation, symmetric inflation target, and enhanced responsiveness to uncertainty. The paper also explores the broader role of central banks in supporting financial stability and addressing emerging challenges such as climate risk, digitalization, and geopolitical fragmentation. It argues that while central banks must remain anchored in their primary objective of price stability, their mandates should adapt to reinforce resilience and support sustainable growth. The conclusion calls for deeper institutional integration in the euro area to amplify the effectiveness of monetary policy and strengthen the international role of the euro. |
| Keywords: | Central Bank Mandates, Price Stability, Monetary Policy Strategy, Financial Stability, Institutional Integration in the Euro Area |
| JEL: | E52 E58 E61 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:iedlwp:336684 |
| By: | Viral V. Acharya; Guillaume Plantin; Olivier Wang |
| Abstract: | We develop a New Keynesian model with financial frictions to study how corporate capital structure shapes static and dynamic monetary policy tradeoffs through the supply side. Ex post, when corporate leverage is high, monetary tightening contracts both demand and supply. As a result, the Phillips curve is highly non-linear and state-dependent, and the “natural rate” Rⁿ ensuring price stability increases with corporate leverage. Yet the tradeoff between inflation targeting and tightening supply constraints implies that the optimal ex-post policy is to set a rate Rᵒᵖᵗ |
| JEL: | E31 E32 E43 E44 E52 E58 E61 G32 G38 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34798 |
| By: | Luca Benati |
| Abstract: | Evidence since the XIX century shows that whereas the demand for M1 is uniformly stable (Benati, Lucas, Nicolini, and Weber, 2021), the demand for broader aggregates is stable under monetary regimes making inflation strongly mean-reverting–such as the Gold Standard and inflation-targeting–but it became temporarily unstable during the Great Inflation. A simple extension of the Sidrauski model rationalizes these findings. The crucial mechanism hinges on the different impact of inflation on the demand for broad money, compared to that for M1. This implies that when inflation is highly persistent broad money demand becomes disconnected from both the demand for M1, and nominal interest rates. This evidence suggests that the post-Goldfeld (1973, 1976) consensus that money demand is unstable due to velocity shocks and financial innovation is incorrect. In fact, the only thing that matters for the stability of the demand for broad money is inflation persistence. I illustrate several implications of these findings, from identifying shocks to the natural rate of interest to estimating the natural rate and long-horizon inflation expectations, and identifying disequilibria in house and stock prices. |
| Keywords: | Lucas critique; monetary regimes; inflation persistence; money demand;natural rate of interest. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:ube:dpvwib:dp2601 |
| By: | Kristin Forbes; Jongrim Ha; M. Ayhan Kose |
| Abstract: | Business cycles are increasingly driven by global shocks, rather than the domestic demand shocks prominent in earlier decades, posing challenges for central banks seeking to meet domestic mandates and communicate their policy decisions. This paper analyzes the evolving influence and characteristics of global and domestic shocks in advanced economies from 1970-2024 using a new FAVAR model that decomposes movements in interest rates, inflation, and output growth into four global shocks (demand, supply, oil, and monetary policy) and three domestic shocks (demand, supply, and monetary policy). We find that the role of global shocks has increased sharply over time and that their characteristics differ from those of domestic shocks across multiple dimensions. Compared to domestic shocks, global shocks have a larger supply component, higher variance, more persistent effects on inflation, and are more asymmetric (contributing more to tightening than to easing phases of monetary policy). As global supply shocks have become more prominent, central banks have also been less willing to “look through” their effects on inflation than for comparable domestic shocks. The distinct characteristics and rising influence of global shocks—particularly global supply shocks—have significant implications for modeling monetary policy and designing central bank frameworks. |
| JEL: | E31 E32 E52 F41 F42 F44 F47 F62 G15 Q43 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34806 |
| By: | Eduardo Gutiérrez; Alari Paulus; Alex Grimaud; Daniel Enderle; Erwan Gautier; Cristina Conflitti; Ludmila Fadejeva; Valentin Jouvanceau; Jean-Oliver Menz; Pavlo Petroulas |
| Abstract: | We use CPI micro data for nine euro area countries to document new evidence on consumer price stickiness in the euro area during the 2021-2024 inflation cycle. In 2022, the monthly frequency of price changes reached 12%, compared with an average of 8% over 2010–2019, roughly a four- percentage-point increase; it then fell quickly in 2023 and more slowly in 2024, ending close to its pre-pandemic level. The decline in the frequency of price changes was faster for food and non- energy industrial goods (NEIG) than for services, where frequencies remained elevated in 2024. The overall frequency rose mainly because there were more price increases, while the magnitude of the average size of the price increases or decreases changed only marginally during the surge. Products with a larger imported-energy cost share responded more strongly, and hazard-rate evidence shows that the probability of price adjustments increases with the gap between actual and optimal prices, consistent with state-dependent pricing and a steepening of the Phillips curve. To illustrate the implications of this state dependence, a macro model suggests that peak inflation would have been almost 1 percentage point lower if the frequency had not responded to the inflation surge. |
| Keywords: | euro area, inflation surge, micro price data, price rigidities |
| JEL: | E31 E52 F33 L11 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:bge:wpaper:1559 |
| By: | Ekaterina Pirozhkova (Métis Lab EM Normandie - EM Normandie - École de Management de Normandie = EM Normandie Business School, South African Reserve Bank); Nicola Viegi (University of Pretoria [South Africa], ERSA - Economic Research Southern Africa) |
| Abstract: | This paper studies the bank lending channel of monetary policy in South Africa. We measure credit supply with homeloan data from banks and nonbanks and we use monetary shocks via high-frequency asset price reactions to policy announcements in a proxy-SVAR model. We find that the bank lending channel is operative, as banks reduce the supply of homeloans after monetary tightening, negatively impacting the housing market. In addition, we show that the deposit channel underpins the bank lending channel's effectiveness. After a monetary tightening, banks widen the deposits spread and the volume of deposits shrinks, as expected. Since retail deposits are vital stable funding for banks, this mechanism drives the lending channel. |
| Keywords: | Housing finance, Nonbank financial institutions, Credit channel, Bank lending channel, Monetary policy transmission |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05467839 |
| By: | Santiago Camara (McGill University) |
| Abstract: | This paper examines the sign-dependent international spillovers of Federal Reserve and European Central Bank monetary policy shocks. Using a consistent high-frequency identification of pure monetary policy shocks across 44 advanced and non-advanced economies and the methodology of Caravello and Martinez-Bruera, 2024, we documentstrong asymmetries in international transmission. Linear specifications mask these effects: contractionary shocks generate large and significant deteriorations in financialconditions, economic activity, and international trade abroad, while expansionary shocks yield little to no measurable improvement. Our results are robust across samples, identification strategies, and the framework proposed by Ben Zeev et al., 2023. |
| Keywords: | Federal Reserve; European Central Bank; monetary policy spillovers; international transmission; sign-dependent asymmetry |
| JEL: | E52 F41 F42 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:aoz:wpaper:386 |
| By: | Arisa Chantaraboontha |
| Abstract: | This paper employs disaggregated panel data to examine the evolution of Thailand’s Phillips Curve (PC) before and during the pandemic, providing empirical evidence on the nature of Thai inflation dynamics and their implications for optimal monetary policy formulation. Utilizing the real output gap derived from various methodologies, the findings reveal a relatively flat PC for Thailand, with a slightly steeper curve after COVID-19. In addition to domestic demand, external demand—reflected through global energy prices and food prices—played a significant role in Thailand’s inflation dynamics. The Thai PC exhibits both backward-looking and forward-looking behavior, with a more weight on inertia parts. In addition to the price PC, the empirical evidence supports the presence of a wage PC, with coefficients comparable in magnitude to those for non-tradable inflation, suggesting that wage dynamics constitute a driver of non-tradable price developments. Meanwhile, staggered real wage setting is found to contribute to the backward-looking component of Thai inflation. Under an optimal inflation-targeting monetary policy, greater weight is placed on closing the inflation gap during normal periods, with even more emphasis during high-inflation episodes. This result, however, does not hold when the output gap is measured using the HP filter in the policy optimization. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:dpr:wpaper:1303 |
| By: | Joseph Abadi; Jesús Fernández-Villaverde; Daniel Sanches |
| Abstract: | We present a micro-founded monetary model of the world economy to study international currency competition. Our model features "unipolar'' equilibria, with a single dominant international currency, and "multipolar'' equilibria, in which multiple currencies circulate internationally. Long-run equilibria are highly history-dependent and tend towards the emergence of a dominant currency. Governments can compete to internationalize their currencies by offering attractive interest rates on their sovereign debt, but large economies have a natural advantage in ensuring the dominance of their currencies. We calibrate the model to assess the quantitative importance of these mechanisms and study the international monetary system's dynamics under several counterfactual scenarios. |
| JEL: | E42 E58 G21 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34817 |
| By: | Alessandro Franconi; Lucas Hack |
| Abstract: | We estimate the macroeconomic effects of U.S. imports tariff shocks using several tariff measurement and identification approaches. Tariff shocks reduce output but increase consumer prices. Monetary policy partially accommodates these shocks with a policy easing. To quantify the dependence on systematic monetary policy, we use empirically identified monetary policy shocks to construct counterfactuals that are robust against model misspecification and the Lucas critique. When monetary policy strictly stabilizes inflation, the output contraction at the trough is 36% larger than in the baseline. In contrast, strict output stabilization implies a peak inflation effect that almost doubles, compared to the baseline. |
| Keywords: | Tariffs, Trade, Imports, Monetary Policy, Counterfactuals |
| JEL: | C32 E31 E32 E52 F14 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:bfr:banfra:1035 |
| By: | Hamidreza Aziminia (Sharif University of Technology); Seyed Ali Madanizadeh (Sharif University of Technology); Amineh Mahmoudzadeh (Sharif University of Technology) |
| Abstract: | This paper provides new evidence on the impact of exchange rate depreciation on pricing behavior. Using micro data on consumer price quotes in Iran from 2006 to 2022, we study price adjustments across a wide range of macroeconomic conditions—from low to high inflation and from stable to volatile exchange rates. While most existing studies emphasize the role of inflation, our analysis highlights the distinct contribution of exchange rate depreciation. We find that (1) in the short run, both the frequency and absolute size of price changes respond more to inflation than to exchange rate depreciation, but FX effects is stronger over longer horizons; (2) FX depreciation has a pronounced nonlinear effect on frequency of price changes, showing a significant impact only at high depreciation levels, while inflation displays a more linear pattern; (3) we find no evidence of nonlinear effects for either inflation or FX depreciation on the absolute size of price changes; and (4) expected inflation influences pricing behavior independently of actual inflation. |
| Date: | 2025–12–05 |
| URL: | https://d.repec.org/n?u=RePEc:erg:wpaper:1809 |
| By: | Diego Bonelli (BANCO DE ESPAÑA) |
| Abstract: | Inflation risk explains a significant share of the systematic residual variation in yield spread changes beyond credit factors and intermediation frictions. Movements in expected inflation directly affect the real value of debt and, consequently, bond prices. I show that shocks to inflation expectations, volatility, and cyclicality – derived from inflation swap prices – are important determinants of yield spread movements. Load-ing patterns become more pronounced with higher ex-ante default risk and cash-flow flexibility but weaken with refinancing intensity. To rationalize the findings, I show that the same patterns emerge in a model of debt rollover risk with stochastic inflation and sticky cash flows. |
| Keywords: | inflation risk, corporate bonds, yield spread changes, inflation-linked derivatives |
| JEL: | G10 G12 G20 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:bde:wpaper:2603 |
| By: | Leahy, John Vincent; Ranošová, Tereza |
| Abstract: | We exploit cross-sectional variation in the response of US states to a monetary policy shock to study how the impact of monetary policy varies with the share of married women who work. We find that the economy's response is more muted the lower the share of married women employed before the shock. We argue that a plausible explanation is a shielded demand response by households, insured by the "added worker effect". When women are only weakly attached to the labor market, they can flexibly enter and exit to supplement household income in times of need, providing a powerful insurance mechanism against aggregate shocks. We provide three additional pieces of evidence. First, monetary policy shocks have a stronger effect in states where married women are more firmly attached to the labor market (making fewer transitions in and out). Second, following an increase in the federal funds rate, married women themselves are comparatively more likely to be employed (and to enter employment) in states where the share of married women working pre- shock is low. Third, in contrast to employment, wages of married women fall more in states where married women have worked less, consistent with a differential labor supply response to the shock. |
| Keywords: | Added-worker effect, intrahousehold insurance, monetary policy |
| JEL: | J21 J11 E24 E52 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:bubdps:336748 |
| By: | Juan Camilo Laborde Vera |
| Abstract: | How does the current account respond to a monetary policy shock? The answer to this perennial question is theoretically ambiguous and empirical evidence is particularly scarce in emerging markets due to challenges in identifying exogenous policy variation. I construct a novel dataset of monetary policy shocks using analysts’ forecasts of policy rate decisions for an unbalanced panel of five emerging market economies in Latin America during 1999-2024. I estimate impulse response functions using local projections and find that a monetary tightening shock leads to a “J curve” pattern in the current account: a short-run contraction followed by a medium-run expansion. The response is heterogeneous in the cross-section and depends on the strength of the exchange rate appreciation resulting from the monetary contraction and the country’s export-import structure. The panel estimation results show that exports and imports exhibit a hump-shaped pattern and decline by 4.5 and 5.9 per cent, respectively, as a result of a one-percentage-point policy tightening shock. The results are robust to alternative measures of monetary shocks. *****RESUMEN: ¿Cómo responde la cuenta corriente a un choque de política monetaria? La respuesta a esta pregunta perenne es teóricamente ambigua y la evidencia empírica es particularmente escasa en países emergentes debido a desafíos en la identificación de fuentes de variación exógena de la política monetaria. En este artículo, construyo una base de datos novedosa de choques de política monetaria utilizando pronósticos de analistas sobre decisiones de tasa de política monetaria para un panel desbalanceado de cinco economías emergentes de América Latina durante 1999-2024. Estimo funciones de impulso-respuesta mediante proyecciones locales y encuentro que una contracción monetaria genera un patrón de "curva J" en la cuenta corriente: una caída en el corto plazo seguida de una expansión en el mediano plazo. La respuesta es heterogénea entre países y depende de la fortaleza de la apreciación cambiaria que resulta de la contracción monetaria y de la estructura exportadora e importadora del país. Los resultados de las estimaciones tipo panel muestran que las exportaciones y las importaciones exhiben un patrón jorobado y caen 4, 5% y 5, 9%, respectivamente, como resultado de un choque monetario contractivo de un punto porcentual. Los resultados son robustos a la utilización de medidas alternativas de choques monetarios. |
| Keywords: | Monetary Policy, Local Projections, Monetary Policy Shocks, Current Account Adjustment, Open Economy Macroeconomics, International Macroeconomics, Política Monetaria, Proyecciones Locales, Choques de Política Monetaria, Ajuste de la Cuenta Corriente, Macroeconomía de Economía Abierta, Macroeconomía Internacional. |
| JEL: | E52 F32 F41 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:bdr:borrec:1343 |
| By: | Kentaro KAWASAKI; Junko SHIMIZU |
| Abstract: | AMU (Asian Monetary Unit) is a database constructed by Ogawa and Shimizu (2005) and made available on the RIETI website. The AMU basket weights are based on intraregional trade shares and GDP. However, 20 years have passed since its introduction, and the economies of Asian countries, and particularly China's, have developed significantly. Consequently, it has become necessary to review the weights of the AMU basket. The purpose of this paper is to examine which combinations of current Asian currencies form an optimal currency area by using the G-PPP Model, and to explore other possibilities to construct a new basket weight for the AMU. Based on prior research, we confirmed that incorporating factors such as each country's financial openness, exchange rate policy, the share of invoice currencies in intra-regional trade, the share of intra-regional FDI, and the degree of production networks and value chains within the region yielded more balanced weights for the basket. This approach better reflects the current economic conditions in the region. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:26015 |
| By: | McLeay, Michael; Tenreyro, Silvana; von dem Berge, Lukas |
| Abstract: | With the monetary policy lower bound a re-emerging concern in some locations, we present new insights on the impact of negative policy rates. We develop a new theoretical model to match the empirical evidence on their effects. The model features a heterogeneous, oligopolistic banking sector where loan pricing is determined in part by the availability of deposit funding and in part by wholesale funding. The use of non-deposit funding ensures that the bank lending channel of negative rates remains active. We explore the impact of the policy on different types of banks: High-deposit banks may experience a fall in interest margins and profitability, which can result in reduced lending. But this is more than compensated for by greater lending from low-deposit banks. We embed this banking sector in an open-economy macroeconomic model, featuring exchange-rate and capital market transmission channels, which continue to work as normal when rates are negative. These non-bank channels, combined with general equilibrium effects and an active bank lending channel, mean that the transmission of negative rates is only somewhat weaker than the transmission of conventional policy. |
| JEL: | J1 |
| Date: | 2026–02–01 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:130299 |
| By: | David Argente; Chang-Tai Hsieh; Munseob Lee |
| Abstract: | Measuring aggregate inflation is subject to two opposing biases: unobserved quality and variety growth, and the use of incorrect weights when new varieties are misclassified. We show that it is possible to measure an aggregate price index free of these biases when we have a subset of products where these two errors average to zero. This procedure does not require us to distinguish new from existing goods, measure quality attributes directly, or classify new varieties into the appropriate category. We implement this approach using BEA data from 1959 to 2019, approximating the official PCE price index with a CES aggregate of BEA prices at the product level. Our estimate of the inflation rate exceeds the CES aggregate of BEA prices by 0.3 to 1.0 percentage points per year on average. The aggregate bias was close to zero prior to the BLS introducing hedonic adjustments, which suggests that only adjusting for quality bias can lead to an underestimation of overall inflation, particularly in quality-adjusted categories. |
| JEL: | D11 D12 E01 E31 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34803 |
| By: | Umair, Syed Muhammad; Ali, Amjad; Audi, Marc |
| Abstract: | This study explores the influence of financial technology adoption on financial stability across 35 emerging market economies over the period 2015–2024. A fintech adoption index is constructed using data from the GSMA mobile money metrics, World Bank database, and Bank for International Settlements Fintech Statistics, including indicators such as mobile payment transactions, transaction volumes, and the number of fintech startups. Principal component analysis is employed to reduce dimensionality and enhance the validity and comparability of the index across countries and time. To assess the relationship between fintech adoption and financial stability, this study applies the cross-sectionally augmented autoregressive distributed lag model, which is particularly suitable for panel datasets with mixed integration orders and cross-sectional dependence features commonly observed in macroeconomic analyses of emerging economies. Regulatory quality, measured using the World Bank’s Worldwide Governance Indicators, is examined as a moderating factor. The results reveal that higher levels of fintech adoption improve financial stability, especially in environments with stronger regulatory frameworks. Robustness is confirmed through several diagnostic checks, including the CIPS unit root test, alternative model specifications, and interaction term analysis. |
| Keywords: | Fintech Adoption, Financial Stability, Emerging Markets, Regulatory Quality |
| JEL: | G2 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:127487 |
| By: | Powell, Alan A. |
| Keywords: | Research and Development/Tech Change/Emerging Technologies, Research Methods/Statistical Methods |
| URL: | https://d.repec.org/n?u=RePEc:ags:monebs:267766 |
| By: | Niels Joachim Gormsen; Eben Lazarus |
| Abstract: | A large body of work has sought to measure the effect of interest rates on equity valuations. The challenge in doing so is that both are endogenous, and their comovement depends on the forces driving interest-rate changes. To address this problem, we develop and estimate a decomposition that splits movements in real rates into three structural drivers: changes in expected growth, risk, or “pure discounting.” We show that only pure discount-rate shocks transmit one-for-one to equity valuations, with little or negative transmission of growth and risk shocks. Implementing our decomposition with a global panel of growth expectations and asset prices, we find a weak unconditional relation between valuations and real rates but a strong relation with the pure discounting component, which explains 80% of cross-country valuation changes since 1990. In the U.S., we find that 35% of the interest-rate decline is attributable to pure discounting, implying that only a fraction of the change in rates has passed through directly to equities. We use the decomposition to revisit evidence on the role of interest rates in explaining price variation, and to study higher-frequency returns, cross-sectional rate exposures, duration-matched equity premia, and reactions to monetary policy. |
| JEL: | E44 F30 G1 G10 G12 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34814 |
| By: | Fuster, Andreas; Gianinazzi, Virginia; Hackethal, Andreas; Schnorpfeil, Philip; Weber, Michael |
| Abstract: | How borrowers respond to future changes in the interest rate on their debt matters for the transmission of monetary policy and for household financial stability. Combining bank data, a letter RCT, and a survey, we study this question in the context of the German mortgage market, where since 2022 borrowers have faced high interest rates when their rate fixation period ends. We find that borrower actions substantially reduce the impact of higher rates on monthly payments. Survey responses corroborate high informedness and a strong propensity to prepare for rate changes. The letter intervention does not affect rate beliefs but increases awareness of available options and refinancing among borrowers close to expiration of their rate fixation. |
| Keywords: | Mortgages, Refinancing, Interest Rates, Survey, RCT |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:safewp:336816 |
| By: | Torsten Ehlers; Mathias Hoffmann; Alexander Raabe |
| Abstract: | House prices co-move considerably across countries. We show how non-US global banks and their exposure to US dollar funding conditions help explain this comovement. When the dollar appreciates, mortgage lending and house prices decrease more in borrower countries whose non-US creditor banks are more exposed to dollar funding conditions. As US dollar funding conditions vary, borrowing country pairs with higher joint exposure to US dollar funding conditions via their non-US creditor banks exhibit a higher synchronization of mortgage credit and house price growth. We capture the exposure to dollar funding conditions by the bilateral treasury basis between the currency of the non-US global creditor banks' nationality and the US dollar, a choice that we motivate in a simple value-at-risk model. Our results identify a novel international spillover channel of US dollar funding conditions. Because it works through heterogenous dollar funding exposures among creditors, this new channel is neither linked to common-lender exposures nor to currency mismatches on borrower countries' balance sheets, typically associated with the financial channel of the exchange-rate. |
| Keywords: | house prices, synchronization, US dollar funding, dollar cycle, US treasury basis, convenience yield, capital flows, global banks, global banking network |
| JEL: | F34 F36 G15 G21 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1332 |
| By: | Xavier Denis; Tamaki Descombes; Henri de La Guéronnière |
| Abstract: | Carry trades exploit interest rate differentials between currencies by borrowing at low interest rates in certain currencies and using the proceeds to invest in currencies offering higher interest rates. However, the gains from interest rate differentials can be wiped out by the associated currency volatility. Since the summer of 2024, with the unwinding of positions and weakness of the US dollar, it has been tricky to find the right currency pair to bet on. <p> Les opérations de carry trade profitent de l’écart de taux d’intérêt entre devises, en empruntant à des taux bas dans certaines devises pour financer des investissements en d’autres devises offrant des taux d’intérêt plus élevés. Cependant, le risque de change associé peut supprimer le gain issu des différentiels de taux d’intérêt. Depuis l’été 2024, entre débouclage de positions et faiblesse du dollar, parier sur les bonnes devises n’a pas été chose aisée. |
| Date: | 2026–02–11 |
| URL: | https://d.repec.org/n?u=RePEc:bfr:econot:433 |
| By: | Murad Farzulla; Andrew Maksakov |
| Abstract: | Cryptocurrency markets have grown to represent over $3 trillion in capitalization, yet no unified index exists to monitor the systemic risks arising from the interconnection between decentralized finance (DeFi) protocols and traditional financial institutions. This paper introduces the Aggregated Systemic Risk Index (ASRI), a composite measure comprising four weighted sub-indices: Stablecoin Concentration Risk (30%), DeFi Liquidity Risk (25%), Contagion Risk (25%), and Regulatory Opacity Risk (20%). We derive theoretical foundations for each component, specify quantitative formulas incorporating data from DeFi Llama, Federal Reserve FRED, and on-chain analytics, and validate the framework against historical crisis events including the Terra/Luna collapse (May 2022), the Celsius/3AC contagion (June 2022), the FTX bankruptcy (November 2022), and the SVB banking crisis (March 2023). Event study analysis detects statistically significant abnormal signals for all four crises (t-statistics 5.47-32.64, all p |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.03874 |