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Why “Paying in Rubles” May Prove Irrelevant
Russia’s recent decree to 'unfriendly' buyers of its natural gas may not make a great deal of difference in economic terms.
Conference Paper
Bank consolidation and consumer loan interest rates
Journal Article
The Fed and Its Shadow: A Historical View
Central bank policies have always incorporated both a discretionary or active component and a passive component. Successful central banking has required a coordination of the two components. After a period of apparent dormancy, the passive component of monetary policy has emerged from the shadows and become relevant for Federal Reserve policy today.
Conference Paper
Payment system settlement and bank incentives
Working Paper
Payment system settlement and bank incentives
In this paper we consider the relative merits of net versus gross settlement of interbank payments. Net settlement economizes on the costs of holding non-interest-bearing reserves but increases moral hazard problems. The "put option" value of default under net settlement can also distort banks' investment incentives. ; Absent these distortions, net settlement dominates gross, although the optimal net settlement scheme may involve a positive probability of default. Net settlement becomes more attractive relative to gross settlement if bank assets have to be liquidated at less than book value.
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 ...
Discussion Paper
Standing Repo Facilities, Then and Now
Recently there have been discussions, both within the FOMC and more broadly, about whether the FOMC should set up a standing repo facility. Such a facility would allow banks to sell safe assets (U.S. Treasury securities) to the Fed, with the assurance of subsequent repurchase, in unlimited quantities at an administered rate. This is not a new idea. In fact, a similar facility was implemented in 1683by the Bank of Amsterdam, the leading central bank of the time, and operated for more than a century afterward. In this article, we describe the motivations, operations, and limitations of the Bank ...