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Jel Classification:D40 

Working Paper
Embedded Supervision: How to Build Regulation into Blockchain Finance

The spread of distributed ledger technology (DLT) in finance could help to improve the efficiency and quality of supervision. This paper makes the case for embedded supervision, i.e., a regulatory framework that provides for compliance in tokenized markets to be automatically monitored by reading the market?s ledger, thus reducing the need for firms to actively collect, verify and deliver data. After sketching out a design for such schemes, the paper explores the conditions under which distributed ledger data might be used to monitor compliance. To this end, a decentralized market is modelled ...
Globalization Institute Working Papers , Paper 371

Working Paper
Collateralized Debt Networks with Lender Default

The Lehman Brothers' 2008 bankruptcy spread losses to its counterparties even when Lehman was a lender of cash, because collateral for that lending was tied up in the bankruptcy process. I study the implications of such lender default using a general equilibrium network model featuring endogenous leverage, endogenous asset prices, and endogenous network formation. The multiplex graph model has two channels of contagion: a counterparty channel of contagion and a price channel of contagion through endogenous collateral price. Borrowers diversify their lenders because of the counterparty risk, ...
Finance and Economics Discussion Series , Paper 2019-083

Working Paper
Macroeconomic Implications of Uniform Pricing

We compile a new database of grocery prices in Argentina, with over 9 million observations per day. We find uniform pricing both within and across regions—i.e., product prices almost do not vary within stores of a chain. Uniform pricing implies that prices would not change with regional conditions or shocks, particularly so if chains operate in several regions. We confirm this hypothesis using employment data. While prices in stores of chains operating almost exclusively in one region do react to changes in regional employment, stores of chains that operate in many regions do not. Finally, ...
Working Papers , Paper 2019-024

Working Paper
Relative price dispersion: evidence and theory

REVISED: 8/1/18: We use a large data set on retail pricing to document that a sizable portion of the cross-sectional variation in the price at which the same good trades in the same period and in the same market is due to the fact that stores that are, on average, equally expensive set persistently different prices for the same good. We refer to this phenomenon as relative price dispersion. We argue that relative price dispersion stems from sellers? attempts to discriminate between high-valuation buyers who need to make all of their purchases in the same store and low-valuation buyers who are ...
Working Papers , Paper 16-6

Report
Misinformation in Social Media: The Role of Verification Incentives

We develop a model in which the prevalence and sharing of misinformation endogenously arise from the interaction between (i) users’ decisions to verify and share news of unknown truthfulness and (ii) producers’ choices to generate fake content. We use the model to examine how policies intended to combat misinformation affect users’ incentives to engage in costly news verification. Via this channel, unintended effects may emerge from: lowering verification costs borne by users; disrupting the supply of fake content; and introducing imperfect filters. We provide sensitivity measures, akin ...
Staff Reports , Paper 1028

Working Paper
Macroeconomic Implications of Uniform Pricing

We compile a new database of grocery prices in Argentina. We find uniform pricing both within and across regions—i.e., prices almost do not vary within stores of a chain. In line with uniform pricing, prices in stores of chains operating in one region react to changes in regional employment, while prices in multi-region chains do not. Using a quantitative regional model with multi-region firms and uniform pricing, we find a one-half smaller elasticity of prices to a regional than an aggregate shock. This result highlights that some caution may be necessary when using regional shocks to ...
Working Papers , Paper 2019-024

Working Paper
Accounting for persistence and volatility of good-level real exchange rates: the role of sticky information

Volatile and persistent real exchange rates are observed not only in aggregate series but also on the individual good level data. Kehoe and Midrigan (2007) recently showed that, under a standard assumption on nominal price stickiness, empirical frequencies of micro price adjustment cannot replicate the time-series properties of the law-of-one-price deviations. We extend their sticky price model by combining good specific price adjustment with information stickiness in the sense of Mankiw and Reis (2002). Under a reasonable assumption on the money growth process, we show that the model fully ...
Globalization Institute Working Papers , Paper 07

Working Paper
Macroeconomic Implications of Uniform Pricing

We compile a new database of grocery prices in Argentina, with over 9 million observations per day. We find uniform pricing both within and across regions—i.e., product prices almost do not vary within stores of a chain. Uniform pricing implies that prices would not change with regional conditions or shocks, particularly so if chains operate in several regions. We confirm this hypothesis using employment data. While prices in stores of chains operating almost exclusively in one region do react to changes in regional employment, stores of chains that operate in many regions do not. Finally, ...
Working Papers , Paper 2019-024

Working Paper
Using Brexit to Identify the Nature of Price Rigidities

Using price quote data that underpin the official U.K. consumer price index (CPI), we analyze the effects of the unexpected passing of the Brexit referendum to the dynamics of price adjustments. The sizable depreciation of the British pound that immediately followed Brexit works as a quasi-experiment, enabling us to study the transmission of a large common marginal cost shock to inflation as well as the distribution of prices within granular product categories. A large portion of the inflationary effect is attributable to the size of price adjustments, implying that a time-dependent ...
Working Paper Series , Paper 2019-13

Working Paper
Noisy information, distance and law of one price dynamics across US cities

Using US micro price data at the city level, we provide evidence that both the volatility and the persistence of deviations from the law of one price (LOP) are rising in the distance between US cities. A standard, two-city, stochastic equilibrium model with trade costs can predict the relationship between volatility and distance but not between persistence and distance. To account for the latter fact, we augment the standard model with noisy signals about the state of nominal aggregate demand that are asymmetric across cities. We further show that the main predictions of the model continue to ...
Globalization Institute Working Papers , Paper 216

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