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Discussion Paper
Do Exchange Rates Fully Reflect Currency Pressures?
Currency values are important both for the real economy and the financial sector. When faced with currency market pressures, some central banks and finance ministries turn to foreign exchange intervention (FXI) in an effort to reduce realized currency depreciation, thus diminishing its economic and financial consequences. This post provides insights into how effective these interventions might be in limiting currency depreciation.
Speech
Transcript of Linda Goldberg on the EconoFact Chats Podcast
A discussion of the special role of the U.S dollar.
Journal Article
Bitcoin vs. the Buck: Is Currency Competition a Good Thing?
Ever since the U.S. established a single currency in the 19th century, the idea of private money has evoked panics and bank failures. In the cryptocurrency era, can the dollar stay sound?
Discussion Paper
Runs on Stablecoins
Stablecoins are digital assets whose value is pegged to that of fiat currencies, usually the U.S. dollar, with a typical exchange rate of one dollar per unit. Their market capitalization has grown exponentially over the last couple of years, from $5 billion in 2019 to around $180 billion in 2022. Notwithstanding their name, however, stablecoins can be very unstable: between May 1 and May 16, 2022, there was a run on stablecoins, with their circulation decreasing by 15.58 billion and their market capitalization dropping by $25.63 billion (see charts below.) In this post, we describe the ...
Discussion Paper
Towards Increasing Complexity: The Evolution of the FX Market
The foreign exchange market has evolved extensively over time, undergoing important shifts in the types of market participants and the mix of instruments traded, within a trading ecosystem that has become increasingly complex. In this post, we discuss fundamental changes in this market over the past twenty-five years and highlight some of the implications for its future evolution. Our analysis suggests that maintaining a healthy price discovery process and fostering a level playing field among participants are areas to watch for challenges. The consequences of the evolution of the FX ...
Speech
Negative nominal central bank policy rates: where is the lower bound?
Remarks at the University of Wisconsin.
Journal Article
The Decline in Currency Use at a National Retail Chain
We bring new evidence to bear on the contributions of changing transaction sizes and changing demographics to the decline in cash payments at a national retail chain. On average, across the thousands of store locations in our study, the share of cash transactions fell by 8.6 percentage points from February 2011 to February 2015. Our statistical model attributes approximately 1.3 percentage points of that decline to increasing transaction sizes. Changes in demographic and other location-specific variables contribute between 0.5 and 1.3 percentage points, so our analysis attributes ...
Working Paper
The Rise in Home Currency Issuance
Using a large sample of private international bond issues, we document a substantial decline in the share of international bonds denominated in major reserve currencies over the last two decades, and an increase in bonds denominated in issuers? home currencies. These secular trends appear to have accelerated notably after the global financial crisis. Observed increases in home currency foreign bond issuance was larger in countries with stable inflation and lower government debt, and in emerging markets that adopted explicit inflation targeting policies. We then present a model that ...
Report
A bargaining theory of trade invoicing and pricing
We develop a theoretical model of international trade pricing in which individual exporters and importers bargain over the transaction price and exposure to exchange rate fluctuations. We find that the choice of price and invoicing currency reflects the full market structure, including the extent of fragmentation and the degree of heterogeneity across importers and across exporters. Our study shows that a party has a higher effective bargaining weight when it is large or more risk tolerant. A higher effective bargaining weight of importers relative to exporters in turn translates into lower ...
Discussion Paper
What If the U.S. Dollar's Global Role Changed?
It isn’t surprising that the dollar is always in the news, given the prominence of the United States in the global economy and how often the dollar is used in transactions around the world (as discussed in a 2010 Current Issues article). But the dollar may not retain this dominance forever. In this post, we consider and catalog the implications for the United States of a potential lessening of the dollar’s primacy in international transactions. The circumstances surrounding such a possibility are important for the effects. As long as U.S. fundamentals remain strong, key consequences could ...