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Jel Classification:E51 

Working Paper
Monitoring Money for Price Stability

In this paper, we use a simple model of money demand to characterize the behavior of monetary aggregates in the United States from 1960 to 2016. We argue that the demand for the currency component of the monetary base has been remarkably stable during this period. We use the model to make projections of the nominal quantity of cash in circulation under alternative future paths for the federal funds rate. Our calculations suggest that if the federal funds rate is lifted up as suggested by the survey of economic projections made by the members of the Federal Open Market Committee (FOMC), the ...
Working Papers , Paper 744

Working Paper
Lending Relationships and Optimal Monetary Policy

We construct and calibrate a monetary model of corporate finance with endogenous formation of lending relationships. The equilibrium features money demands by firms that depend on their access to credit and a pecking order of financing means. We describe the mechanism through which monetary policy affects the creation of relationships and firms' incentives to use internal or external finance. We study optimal monetary policy following an unanticipated destruction of relationships under different commitment assumptions. The Ramsey solution uses forward guidance to expedite creation of new ...
Working Paper , Paper 20-13

Working Paper
Beyond the Doomsday Economics of “Proof-of-Work” in Cryptocurrencies

This paper discusses the economics of how Bitcoin achieves data immutability, and thus payment finality, via costly computations, i.e., ?proof-of-work.? Further, it explores what the future might hold for cryptocurrencies modelled on this type of consensus algorithm. The conclusions are, first, that Bitcoin counterfeiting via ?double-spending? attacks is inherently profitable, making payment finality based on proof-of-work extremely expensive. Second, the transaction market cannot generate an adequate level of ?mining? income via fees as users free-ride on the fees of other transactions in a ...
Globalization Institute Working Papers , Paper 355

Working Paper
The Role of Oil Price Shocks in Causing U.S. Recessions

Although oil price shocks have long been viewed as one of the leading candidates for explaining U.S. recessions, surprisingly little is known about the extent to which oil price shocks explain recessions. We provide a formal analysis of this question with special attention to the possible role of net oil price increases in amplifying the transmission of oil price shocks. We quantify the conditional recessionary effect of oil price shocks in the net oil price increase model for all episodes of net oil price increases since the mid-1970s. Compared to the linear model, the cumulative effect of ...
International Finance Discussion Papers , Paper 1114

Working Paper
Inflation dynamics during the financial crisis

Firms with limited internal liquidity significantly increased prices in 2008, while their liquidity unconstrained counterparts slashed prices. Differences in the firms' price-setting behavior were concentrated in sectors likely characterized by customer markets. The authors develop a model in which firms face financial frictions while setting prices in a customer-markets setting. Financial distortions create an incentive for firms to raise prices in response to adverse demand or financial shocks. These results reflect the firms' reaction to preserve internal liquidity and avoid accessing ...
FRB Atlanta CQER Working Paper , Paper 2015-4

Working Paper
Multiperiod Loans, Occasionally Binding Constraints, and Monetary Policy: A Quantitative Evaluation

We study the implications of multiperiod mortgage loans for monetary policy, considering several realistic modifications?fixed interest rate contracts, a lower bound constraint on newly granted loans, and the possibility of the collateral constraint to become slack?to an otherwise standard DSGE model with housing and financial intermediaries. We estimate the model in its nonlinear form and argue that all these features are important to understand the evolution of mortgage debt during the recent US housing market boom and bust. We show how the nonlinearities associated with the two constraints ...
Working Papers , Paper 19-10

Working Paper
Eggs in One Basket: Security and Convenience of Digital Currencies

Digital currencies store balances in anonymous electronic addresses. We analyze the trade-offs between safety and convenience of aggregating balances in addresses, electronic wallets and banks. In our model agents balance the risk of theft of a large account with the cost to safeguarding a large number of passwords of many small accounts. Account custodians (banks, wallets and other payment service providers) have different objectives and tradeoffs on these dimensions; we analyze the welfare effects of differing industry structures and interdependencies, and in particular the consequences ...
Working Papers , Paper 2020-032

Journal Article
The issuance of series-1996 $100 Federal Reserve notes: goals, strategy, and likely results.

In March 1996, the Federal Reserve began issuing series-1996 $100 Federal Reserve notes. Culminating a cooperative effort by the U.S. Department of the Treasury and the Federal Reserve System that dated from the 1980s, the series-1996 note was the first major design change in U.S. currency in sixty-six years. The new note was developed to provide better protection for users of U.S. currency against the growing threat of counterfeiting, especially that posed by increasingly affordable and capable color scanning and printing systems. This article discusses the Federal Reserve's strategy for ...
Federal Reserve Bulletin , Volume 83 , Issue Jul

Journal Article
The political origins of Section 13(3) of the Federal Reserve Act

At the height of the financial crisis of 2007-09, the Federal Reserve conducted emergency lending under authority granted to it in the third paragraph of Section 13 of the Federal Reserve Act. This article explores the political and legislative origins of the section, focusing on why Congress chose to endow the central bank with such an authority. The author describes how in the initial passage of the act in 1913, Congress demonstrated its steadfast commitment to the ?real bills? doctrine in two interrelated ways: 1) by limiting what assets the Fed could purchase, discount, and use as ...
Economic Policy Review , Issue 24-1 , Pages 1-33

Working Paper
Inflation Globally

The Phillips curve remains central to stabilization policy. Increasing financial linkages, international supply chains, and managed exchange rate policy have given core currencies an outsized influence on the domestic affairs of world economies. We exploit such influence as a source of exogenous variation to examine the effects of the recent financial crisis on the Phillips curve mechanism. Using a difference-in-differences approach, and comparing countries before and after the 2008 financial crisis sorted by whether they endured or escaped the crisis, we are able to assess the evolution of ...
Working Paper Series , Paper 2018-15

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