Search Results
Journal Article
Is Bitcoin a Waste of Resources?
Do Bitcoin and other cryptocurrencies play a useful social role, or do they represent a social waste? Bitcoin is a decentralized recordkeeping system, with updating of the record of transactions in the blockchain.
Newsletter
The Role of Primary Dealers in Mitigating Liquidity Risk at U.S. Central Counterparties
In this article, we examine the role of primary dealers as clearing members at U.S. central counterparties (CCPs) and their importance in liquidity risk management at those CCPs. We find that primary dealers are key contributors to concentration in central clearing—they make up a significant portion of clearing members and an even larger portion of activity cleared by U.S. CCPs. Second, we find that primary dealers are a major source of interconnectedness across U.S. CCPs. Further, we estimate that the bulk of clearing activity in the U.S. is conducted by the primary dealers that are also ...
Journal Article
The Future of Money and Its Implications for Society, Central Banks, and the International Monetary System
This new wave of financial innovations has broad implications for society, banking, and central banking: Digital platforms can ease entry for financial services providers, increase transactional efficiency, and widen access to and participation in the financial system. They could also decrease the use of cash and alter the U.S. dollar's role as today's vehicle currency.
Report
Fiscal implications of the Federal Reserve's balance sheet normalization
The paper surveys the recent literature on the fiscal implications of central bank balance sheets, with a special focus on political economy issues. It then presents the results of simulations that describe the effects of different scenarios for the Federal Reserve's longer-run balance sheet on its earnings remittances to the U.S. Treasury and, more broadly, on the government's overall fiscal position. We find that reducing longer-run reserve balances from $2.3 trillion (roughly the current amount) to $1 trillion reduces the likelihood of posting a quarterly net loss in the future from 30 ...
Report
When does a central bank’s balance sheet require fiscal support?
Using a simple general equilibrium model, we argue that it would be appropriate for a central bank with a large balance sheet composed of long-duration nominal assets to have access to, and be willing to ask for, support for its balance sheet by the fiscal authority. Otherwise its ability to control inflation may be at risk. This need for balance sheet support?a within-government transaction?is distinct from the need for fiscal backing of inflation policy that arises even in models where the central bank?s balance sheet is merged with that of the rest of the government.
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
Responses of International Central Banks to the COVID-19 Crisis
This article reviews and explains the recent policy reactions of the Federal Reserve, the European Central Bank, the Bank of England, and the Bank of Japan to the financial and macroeconomic turmoil caused by the COVID-19 pandemic. The financial and monetary policy actions of major central banks in the most recent crisis have, by some metrics, surpassed their responses to the Global Financial Crisis of 2007-09 in both swiftness and scope.
Working Paper
Fiscal Implications of the Federal Reserve's Balance Sheet Normalization
The paper surveys the recent literature on the fiscal implications of central bank balance sheets, with a special focus on political economy issues. It then presents the results of simulations that describe the effects of different scenarios for the Federal Reserve's longer-run balance sheet on its earnings remittances to the U.S. Treasury and, more broadly, on the government's overall fiscal position. We find that reducing longer-run reserve balances from $2.3 trillion (roughly the current amount) to $1 trillion reduces the likelihood of posting a quarterly net loss in the future from 30 ...
Journal Article
Decentralized Finance: On Blockchain- and Smart Contract-Based Financial Markets
The term decentralized finance (DeFi) refers to an alternative financial infrastructure built on top of the Ethereum blockchain. DeFi uses smart contracts to create protocols that replicate existing financial services in a more open, interoperable, and transparent way. This article highlights opportunities and potential risks of the DeFi ecosystem. I propose a multi-layered framework to analyze the implicit architecture and the various DeFi building blocks, including token standards, decentralized exchanges, decentralized debt markets, blockchain derivatives, and on-chain asset management ...
Journal Article
Addressing Traditional Credit Scores as a Barrier to Accessing Affordable Credit
Affordable credit enables consumers to better manage their finances, cope with unexpected emergencies, and pursue opportunities such as entrepreneurship or higher education. However, many consumers face difficulties obtaining the credit they need. A major impediment is lenders’ reliance on traditional credit scores to assess consumers’ creditworthiness. These credit scores affect not only loan approval decisions but also the interest rates consumers pay on their loans. While credit scores are intended to help lenders make informed decisions about consumers’ risk of default, they do not ...