Search Results
Journal Article
Shadow banking and the crisis of 2007-08
In recent decades, institutions that function much like traditional banks have grown outside regulatory oversight. Yet, as Daniel Sanches explains, these so-called shadow banks are as vulnerable to runs as regular banks. Because banking crises can inflict lasting economic harm, economists are interested in tracing how the panic ensued in the shadow system.
Journal Article
The optimum quantity of money
A central premise of monetary policy in the U.S. throughout the first decade of the 21st century has been a firm commitment to avoid deflation. Indeed, it is the consensus view of policymakers and most economists. Nonetheless, Nobel laureate Milton Friedman proposed that optimal monetary policy should lead to a steady rate of deflation. For some economists, the Friedman rule is mainly a benchmark for thinking clearly about the assumptions underlying our models and a systematic guide for deciding how to modify our models, that is, a way of making scientific progress. However, it is not an ...
Journal Article
U.S. Dollar Dominance: A Blessing or a Curse?
The international dominance of the dollar has benefitted the U.S. economy, but not without risks.
Journal Article
Bitcoin vs. the Buck: Is Currency Competition a Good Thing?
Ever since the U.S. established a single currency in the 19th century, the idea of private money has evoked panics and bank failures. In the cryptocurrency era, can the dollar stay sound?
Journal Article
The Free-Banking Era: A Lesson for Today?
Reaching back to a volatile era in U.S. banking history, Daniel Sanches finds insight for today?s challenge of ensuring a stable banking system ? though perhaps not the lesson one might expect.
Journal Article
Central Bank Digital Currency: Is It a Good Idea?
A CBDC might make banking easier for you and me. It might also change how banks operate.
Journal Article
New Moneys in the Digital Era
The history of money helps explain the recent turmoil in cryptocurrencies.
Working Paper
International Currency Dominance
We present a micro-founded monetary model of the world economy to study international currency competition. Our model features both “unipolar” equilibria, with a single dominant international currency, and “multipolar” equilibria, in which multiple currencies circulate internationally. Governments can compete to internationalize their currencies by offering attractive interest rates on their sovereign debt. A large economy has a natural advantage in ensuring its currency becomes dominant, but if it lacks the fiscal capacity to absorb the global demand for liquid assets, the multipolar ...
Working Paper
International Currency Dominance
We present a micro-founded monetary model of the world economy to study international currency competition. Our model features both “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 ...
Working Paper
Public and Private Money: Inflation Dynamics and Optimal Policy
The total money supply of a modern economy is a combination of publicly and privately issued monies. This paper develops a theory of inflation dynamics and optimal policy for a system in which public fiat money and collateral-backed private liabilities jointly circulate. Private money finances investment projects, and its supply depends on the issuer’s net worth and collateral constraints. The resulting feedback mechanism can generate persistent oscillations and stable banking cycles without aggregate shocks. For some public money growth rates, a dual-money steady state coexists with a ...