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Digital currencies store balances in anonymous electronic addresses. This paper analyzes the trade-offs between the safety and convenience of aggregating balances in addresses, electronic wallets and banks.

How is the stability of the financial sector affected by competition in the deposit market and by decisions banks make about transparency? We find that policies that aim to increase bank competition lead to higher bank deposit rates, increasing both withdrawal incentives and instability.

Access to information about the future direction of the exchange rate can be extremely valuable in the foreign exchange market. Evidence presented in this article suggests that Canadian dealers are more likely to provide interday liquidity to foreign, rather than Canadian, financial customers, since foreign financial flows can be more informative about future movements in the exchange rate. The author reveals a statistical relationship between the supply of liquidity provided by non-financial firms and that provided by dealing institutions across time, and across markets, and suggests that the relationship between the positions of commercial clients and market-makers, and the role played by dealers in interday liquidity provision, has been understated in the market microstructure literature.

How wrong could policymakers be when using linearized solutions to their macroeconomic models instead of nonlinear global solutions?

This paper studies, theoretically and empirically, the unintended consequences of mandatory retention rules in securitization. It proposes a novel model showing that while retention strengthens monitoring, it may also encourage banks to shift risk.

Implications for signal extraction from specifying unobserved components (UC) models with correlated or orthogonal innovations have been well investigated. In contrast, the forecasting implications of specifying UC models with different state correlation structures are less well understood.

This paper studies how a central bank should design a CBDC when private payment providers collect and monetize transaction data. It characterizes the optimal CBDC’s pricing and data policy, and shows how its effects on private payment use and total data depend on market power and data externalities.

Since the creation of Bitcoin in 2009, over 2,000 cryptocurrencies have been issued. We evaluate how well a cryptocurrency functions as a payment system.

We propose a new empirical framework that jointly decomposes the conditional variance of economic time series into a common and a sector-specific uncertainty component. We apply our framework to a disaggregated industrial production series for the US economy. We identify unexpected changes in durable goods uncertainty as drivers of downturns, while unexpected hikes in non-durable goods uncertainty are expansionary.

Using highly disaggregated transaction-level trade data, we document the importance of new firm-level trade partner relationships and the addition of new products to existing relationships in driving aggregate trade flows.