Search Results
Working Paper
Cash-in-the-Market Pricing in a Model with Money and Over-the-Counter Financial Markets
Entrepreneurs need cash to finance their real investments. Since cash is costly to hold, entrepreneurs will underinvest. If entrepreneurs can access financial markets prior to learning about an investment opportunity, they can sell some of their less liquid assets for cash and, as a result, invest at a higher level. When financial markets are over-the-counter, the price that the entrepreneur receives for the assets that he sells depends on the amount of liquidity (cash) that is in the OTC market: Greater levels of liquidity lead to higher asset prices. Since asset prices are linked to ...
Working Paper
Money Matters: Broad Divisia Money and the Recovery of Nominal GDP from the COVID-19 Recession
The rise of inflation in 2021 and 2022 surprised many macroeconomists who ignored the earlier surge in money growth because past instability in the demand for simple-sum monetary aggregates had made these aggregates unreliable indicators. We find that the demand for more theoretically-based Divisia aggregates can be modeled and that their growth rates provide useful information for future nominal GDP growth.Unlike M2 and Divisia-M2, whose velocities do not internalize shifts in liabilities across commercial and shadow banks, the velocities of broader Divisia monetary aggregates are more ...
Report
U.S. Consumer Cash Use, 2012 and 2015 : An Introduction to the Diary of Consumer Payment Choice, Research Data Report No. 17-6
U.S. consumer cash payments averaged 26 percent of all U.S. consumer payments by number (volume share) from 2008 to 2015, according to the Survey of Consumer Payment Choice (SCPC), and were essentially unchanged between 2012 and 2015. New estimates from the Diary of Consumer Payment Choice (DCPC) show that the volume share of consumer cash payments is higher than estimated in the SCPC and suggest that the cash volume share was 8 percentage points lower in 2015 than in 2012. The DCPC most likely does not provide an accurate estimate of the actual change in the cash volume share, however, due ...
Report
Bitcoin as money?
The spectacular rise late last year in the price of Bitcoin, the dominant virtual currency, has attracted much public attention as well as scholarly interest. This policy brief discusses how some features of Bitcoin, as designed and executed to date, have hampered its ability to perform the functions required of a fiat money??as a medium of exchange, unit of account, and store of value. Furthermore, we document how various forms of intermediaries have emerged and evolved within the Bitcoin network, particularly noting the convergence toward concentrated processing, both on and off the ...
Journal Article
Technological Change and Central Banking
The decentralized autonomous organization (DAO) represents a radically new way to manage databases. Since money and payments are all about managing databases and since banks play a central role in money and payments, DAO-based money and payments systems are potentially a disruptive force in the banking system—which includes central banks. One would normally expect regulatory frameworks to evolve with a changing technological landscape. However, the decentralized governance structure characteristic of DAOs renders it near impossible to regulate these entities directly—a property that makes ...
Speech
The Song Remains the Same
Remarks at the New York Fed and Columbia SIPA Monetary Policy Implementation Workshop, New York City.
Working Paper
Money, Banking, and Old-School Historical Economics
We review developments in the history of money, banking, and financial intermediation over the last twenty years. We focus on studies of financial development, including the role of regulation and the history of central banking. We also review the literature of banking and financial crises. This area has been largely unaffected by the so-called new econometric methods that seek to prove causality in reduced form settings. We discuss why historical macroeconomics is less amenable to such methods, discuss the underlying concepts of causality, and emphasize that models remain the backbone of our ...
Journal Article
Self-Insurance and the Risk-Sharing Role of Money
Overcoming the lack of coincidence of wants is a well-acknowledged role of money. In this review, I illustrate that the use of money also promotes risk-sharing in the society: when individuals hold money, it helps other individuals mitigate their own liquidity risks.
Discussion Paper
What Makes a Safe Asset Safe?
Over the last decade, the concept of “safe assets” has received increasing attention, from regulators and private market participants, as well as researchers. This attention has led to the uncovering of some important details and nuances of what makes an asset “safe” and why it matters. In this blog post, we provide a review of the different aspects of safe assets, discuss possible reasons why they may be beneficial for investors, and give concrete examples of what these assets are in practice.
Discussion Paper
Bitcoin Is Not a New Type of Money
Bitcoin, and more generally, cryptocurrencies, are often described as a new type of money. In this post, we argue that this is a misconception. Bitcoin may be money, but it is not a new type of money. To see what is truly new about Bitcoin, it is useful to make a distinction between “money,” the asset that is being exchanged, and the “exchange mechanism,” that is, the method or process through which the asset is transferred. Doing so reveals that monies with properties similar to Bitcoin have existed for centuries. However, the ability to make electronic exchanges without a trusted ...