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Jel Classification:E59 

Payment networks in a search model of money

In a simple search model of money, we study a special kind of memory that gives rise to an arrangement resembling a payment network. Specifically, we assume that agents can pay a cost to access a central database that tracks payments made and received. Incentives must be provided to agents to access the central database and to produce when they participate in this arrangement. We also study policies that can loosen these incentive constraints. In particular, we show that a "no-surcharge" rule has good incentive properties. Finally, we compare our model with that of Cavalcanti and Wallace.
Staff Reports , Paper 263

Working Paper
Fiscal Implications of the Federal Reserve's Balance Sheet Normalization

The paper surveys the recent literature on the fiscal implications of central bank balance sheets, with a special focus on political economy issues. It then presents the results of simulations that describe the effects of different scenarios for the Federal Reserve's longer-run balance sheet on its earnings remittances to the U.S. Treasury and, more broadly, on the government's overall fiscal position. We find that reducing longer-run reserve balances from $2.3 trillion (roughly the current amount) to $1 trillion reduces the likelihood of posting a quarterly net loss in the future from 30 ...
Finance and Economics Discussion Series , Paper 2018-002

Journal Article
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.
Review , Volume 100 , Issue 1 , Pages 1-16

Journal Article
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.
Review , Volume 100 , Issue 2 , Pages 97-106

Trading Partners in the Interbank Lending Market

There is substantial heterogeneity in the structure of trading relationships in the U.S. overnight interbank lending market: Some banks rely on spot transactions, while a majority form stable, concentrated borrowing relationships to hedge liquidity needs. Borrowers pay lower prices and borrow more from their concentrated lenders. When there are exogenous shocks to liquidity supply (days with low GSE lending), concentrated lenders insulate borrowers from the shocks without charging significantly higher interest rates.
Staff Reports , Paper 620

When does a central bank’s balance sheet require fiscal support?

Using a simple general equilibrium model, we argue that it would be appropriate for a central bank with a large balance sheet composed of long-duration nominal assets to have access to, and be willing to ask for, support for its balance sheet by the fiscal authority. Otherwise its ability to control inflation may be at risk. This need for balance sheet support?a within-government transaction?is distinct from the need for fiscal backing of inflation policy that arises even in models where the central bank?s balance sheet is merged with that of the rest of the government.
Staff Reports , Paper 701

Working Paper
Recreating Banking Networks under Decreasing Fixed Costs

Theory emphasizes the central role of the structure of networks in the behavior of financial systems and their response to policy. Real-world networks, however, are rarely directly observable: Banks? assets and liabilities are typically known, but not who is lending how much and to whom. We first show how to simulate realistic networks that are based on balance-sheet information by minimizing costs where there is a fixed cost to forming a link. Second, we also show how to do this for a model with fixed costs that are decreasing in the number of links. To approach the optimization problem, we ...
Working Papers , Paper 19-21

Journal Article
Is Bitcoin a Waste of Resources?

Do Bitcoin and other cryptocurrencies play a useful social role, or do they represent a social waste? Bitcoin is a decentralized recordkeeping system, with updating of the record of transactions in the blockchain.
Review , Volume 100 , Issue 2 , Pages 107-15

Journal Article
Blockchain: What It Is, What It Does, and Why You Probably Don’t Need One

All record-keeping systems (which include monetary systems) must contend with trust issues and methods of organizing historical information.
Review , Volume 100 , Issue 2

Journal Article
What Happens When the Minimum Wage Rises? It Depends on Monetary Policy

Andrew Glover and José Mustre-del-Río examine how monetary policy may amplify or dampen the response of employment and inflation to an increase in the minimum wage. Their model-based analysis suggests a minimum wage increase has expansionary effects on the economy if the central bank is relatively unresponsive to current inflation, and contractionary effects if the central bank responds more aggressively (more than one-for-one) to current inflation. More generally, their framework suggests that if an increase in the minimum wage engenders contractionary effects, the central bank can ...
Economic Review , Volume 106 , Issue no.3 , Pages 5-24



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