A Short Introduction to the World of Cryptocurrencies
In this article, we give a short introduction to cryptocurrencies and blockchain technology. The focus of the introduction is on Bitcoin, but many elements are shared by other blockchain implementations and alternative cryptoassets. The article covers the original idea and motivation, the mode of operation and possible applications of cryptocurrencies, and blockchain technology. We conclude that Bitcoin has a wide range of interesting applications and that cryptoassets are well suited to become an important asset class.
What is the Value of Being a Superhost?
We construct a search model where sellers post prices and produce goods of unknown quality. A match reveals the quality of the seller. Buyers rate sellers based on quality. We show that unrated sellers charge a low price to attract buyers and that highly rated sellers post a high price and sell with a higher probability than unrated sellers. We fi nd that welfare is higher with a ratings system. Using data on Airbnb rentals, we show that Superhosts and hosts with high ratings: 1) charge higher prices, 2) have a higher occupancy rate and 3) higher revenue than average hosts.
The Case for Central Bank Electronic Money and the Non-case for Central Bank Cryptocurrencies
We characterize various currencies according to their control structure, focusing on cryptocurrencies such as Bitcoin and government-issued fiat money. We then argue that there is a large unmet demand for a liquid asset that allows households and firms to save outside of the private financial sector.
Price-level targeting and stabilization policy
The authors construct a dynamic stochastic general equilibrium model to study optimal monetary stabilization policy. Prices are fully flexible and money is essential for trade. The authors? main result is that if the central bank pursues a price-level target, it can control inflation expectations and improve welfare by stabilizing short-run shocks to the economy. The optimal policy involves smoothing nominal interest rates that effectively smooths consumption across states.
Optimal stabilization policy with endogenous firm entry
Monetary policy has significant but overlooked effects on entry and exit of firms. We study optimal monetary stabilization policy in a DSGE model with microfounded money demand and endogenous firm entry. Due to a congestion externality affecting firm entry, the optimal policy deviates from the Friedman rule in all states even though all prices are fully flexible. In contrast to previous Ramsey model with flexible price, our calibration exercises suggest that the model can generate a high volatility of the nominal interest rate which is a direct consequence of policy actions to control entry.
Liquidity Premiums on Government Debt and the Fiscal Theory of the Price Level
We construct a dynamic general equilibrium model where agents use nominal government bonds as collateral in secured lending arrangements. If the collateral constraint binds, agents price in a liquidity premium on bonds that lowers the real rate on bonds. In equilibrium, the price level is determined according to the fiscal theory of the price level. However, the market value of government debt exceeds its fundamental value. We then examine the dynamic properties of the model and show that the market value of the government debt can fluctuate even though there are no changes to current or ...
Money, Banking and Financial Markets
The fact that money, banking, and financial markets interact in important ways seems self-evident. The theoretical nature of this interaction, however, has not been fully explored. To this end, we integrate the Diamond (1997) model of banking and financial markets with the Lagos and Wright (2005) dynamic model of monetary exchange?a union that bears a framework in which fractional reserve banks emerge in equilibrium, where bank assets are funded with liabilities made demandable in government money, where the terms of bank deposit contracts are affected by the liquidity insurance available in ...
Optimal disclosure policy and undue diligence
While both public and private financial agencies supply asset markets with large amounts of information, they do not generally disclose all asset-related information to the general public. This observation leads us to ask what principles might govern the optimal disclosure policy for an asset manager or financial regulator. To investigate this question, we study the properties of a dynamic economy endowed with a risky asset, and with individuals that lack commitment. Information relating to future asset returns is available to society at zero cost. Legislation dictates whether this ...
Channel systems: Why is there a positive spread?
An increasing number of central banks implement monetary policy via two standing facilities: a lending facility and a deposit facility. In this paper we show that it is socially optimal to implement a non-zero interest rate spread. We prove this result in a dynamic general equilibrium model where market participants have heterogeneous liquidity needs and where the central bank requires government bonds as collateral. We also calibrate the model and discuss the behavior of the money market rate and the volumes traded at the ECB?s deposit and lending facilities in response to the recent ...
Friedman meets Hosios: efficiency in search models of money
In this paper the authors study the inefficiencies of the monetary equilibrium and optimal monetary policies in a search economy. They show that the same frictions that give fiat money a positive value generate an inefficient quantity of goods in each trade and an inefficient number of trades (or search decisions). The Friedman rule eliminates the first inefficiency, and the Hosios rule the second. A monetary equilibrium attains the social optimum if and only if both rules are satisfied. When the two rules cannot be satisfied simultaneously, which occurs in a large set of economies, optimal ...