Search Results
Working Paper
Friedman meets Hosios: efficiency in search models of money
In this paper the authors study the inefficiencies of the monetary equilibrium and optimal monetary policies in a search economy. They show that the same frictions that give fiat money a positive value generate an inefficient quantity of goods in each trade and an inefficient number of trades (or search decisions). The Friedman rule eliminates the first inefficiency, and the Hosios rule the second. A monetary equilibrium attains the social optimum if and only if both rules are satisfied. When the two rules cannot be satisfied simultaneously, which occurs in a large set of economies, optimal ...
Working Paper
On the Negatives of Negative Interest Rates
Major central banks remunerate reserves at negative rates (NIR). To study thelong-run effects of NIR, we focus on the role of reserves as intertemporal stores of value that are used to settle interbank liabilities. We construct a dynamic general equilibrium model with commercial banks holding reserves and funding investments with retail deposits. In the long run, NIR distorts investment decisions, lowers welfare, depresses output, and reduces bank profitability. The type of distortion depends on the transmission of NIR to retail deposits. The availability of cash explains the asymmetric ...
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.
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.
Journal Article
Price-level targeting and stabilization policy
The authors construct a dynamic stochastic general equilibrium model to study optimal monetary stabilization policy. Prices are fully flexible and money is essential for trade. The authors? main result is that if the central bank pursues a price-level target, it can control inflation expectations and improve welfare by stabilizing short-run shocks to the economy. The optimal policy involves smoothing nominal interest rates that effectively smooths consumption across states.
Working Paper
Monetary policy with asset-backed money
We study the use of intermediated assets as media of exchange in a neo- classical growth model. An intermediary is delegated control over productive capital and finances itself by issuing claims against the revenue generated by its operations. Unlike physical capital, intermediated claims are assumed to be liquid-they constitute a form of asset-backed money. The intermediary is assumed to control 1) the number of claims outstanding, 2) the dividends paid out to claim holders and 3) the fee charged for collecting the dividend. We find that for patient economies, the first-best allocation can ...
Working Paper
Price level targeting and stabilization policy
We construct a dynamic stochastic general equilibrium model to study optimal monetary stabilization policy. Prices are fully flexible and money is essential for trade. Our main result is that if the central bank pursues a price-level target, it can control inflation expectations and improve welfare by stabilizing short-run shocks to the economy. The optimal policy involves smoothing nominal interest rates which effectively smooths consumption across states.
Working Paper
Optimal stabilization policy with endogenous firm entry
Monetary policy has significant but overlooked effects on entry and exit of firms. We study optimal monetary stabilization policy in a DSGE model with microfounded money demand and endogenous firm entry. Due to a congestion externality affecting firm entry, the optimal policy deviates from the Friedman rule in all states even though all prices are fully flexible. In contrast to previous Ramsey model with flexible price, our calibration exercises suggest that the model can generate a high volatility of the nominal interest rate which is a direct consequence of policy actions to control entry.
Working Paper
What is the Value of Being a Superhost?
We construct a search model where sellers post prices and produce goods of unknown quality. A match reveals the quality of the seller. Buyers rate sellers based on quality. We show that unrated sellers charge a low price to attract buyers and that highly rated sellers post a high price and sell with a higher probability than unrated sellers. We fi nd that welfare is higher with a ratings system. Using data on Airbnb rentals, we show that Superhosts and hosts with high ratings: 1) charge higher prices, 2) have a higher occupancy rate and 3) higher revenue than average hosts.