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Working Paper
Can Reputation Discipline the Gig Economy? Experimental Evidence from an Online Labor Market
Sojourner, Aaron; Benson, Alan; Umyarov, Akhmed (2018-12-28)
Just as employers face uncertainty when hiring workers, workers also face uncertainty when accepting employment, and bad employers may opportunistically depart from expectations, norms, and laws. However, prior research in economics and information sciences has focused sharply on the employer?s problem of identifying good workers rather than vice versa. This issue is especially pronounced in markets for gig work, including online labor markets, where platforms are developing strategies to help workers identify good employers. We build a theoretical model for the value of such reputation ...
Opportunity and Inclusive Growth Institute Working Papers , Paper 16

Working Paper
A Model of Charles Ponzi
Barlevy, Gadi; Xavier, Inês (2025-03-18)
We develop a model of Ponzi schemes with asymmetric information to study Ponzi frauds. A long-lived agent offers to save on behalf of short-lived agents at a higher rate than they can earn themselves. The long-lived agent may genuinely have a superior savings technology, but may be an imposter trying to steal from short-lived agents. The model identifies when a Ponzi fraud can occur and what interventions can prevent it. A key feature of Ponzi frauds is that the long-lived agent builds trust over time and improves their reputation by keeping the scheme going.
Working Paper Series , Paper WP 2025-05

Working Paper
A Model of Charles Ponzi
Barlevy, Gadi; Xavier, Inês (2025-03-25)
We develop a model of Ponzi schemes with asymmetric information to study Ponzi frauds. A long-lived agent offers to save on behalf of short-lived agents at a higher rate than they can earn themselves. The long-lived agent may genuinely have a superior savings technology, but may be an imposter trying to steal from short-lived agents. The model identifies when a Ponzi fraud can occur and what interventions can prevent it. A key feature of Ponzi frauds is that the long-lived agent builds trust over time and improves their reputation by keeping the scheme going.
Finance and Economics Discussion Series , Paper 2025-020

Working Paper
Network Contagion and Interbank Amplification during the Great Depression
Richardson, Gary; Mitchener, Kris James (2016-03-15)
Interbank networks amplified the contraction in lending during the Great Depression. Banking panics induced banks in the hinterland to withdraw interbank deposits from Federal Reserve member banks located in reserve and central reserve cities. These correspondent banks responded by curtailing lending to businesses. Between the peak in the summer of 1929 and the banking holiday in the winter of 1933, interbank amplification reduced aggregate lending in the U.S. economy by an estimated 15 percent.
Working Paper , Paper 16-3

Working Paper
Financing Constraints, Firm Dynamics, and International Trade
Verani, Stéphane; Gross, Till (2012-08)
There is growing empirical support for the conjecture that access to credit is an important determinant of firms' export decisions. We study a multi-country general equilibrium economy in which entrepreneurs and lenders engage in long-term credit relationships. Financial constraints arise in consequence of financials contracts that are optimal given information asymmetry. Consistent with empirical regularities, as firm age and size increase, the model implies decreasing mean and variance of fi rm growth and increasing fi rm survival. Exporters are larger, their survival in international ...
Finance and Economics Discussion Series , Paper 2012-68

Journal Article
Decentralized Finance (DeFi): Transformative Potential and Associated Risks
Swem, Nathan; Gerszten, Jacob; Carapella, Francesca; Dumas, Edward (2022-10-18)
Financial services in the crypto finance world are provided by a combination of centralized finance (CeFi) organizations and decentralized finance (DeFi). CeFi's are roughly similar to traditional financial intermediaries, but DeFi seeks to provide services using smart contracts (computer code) rather than an intermediary. DeFi's unusual structure creates some interesting potential but also raises new risks in addition to those already inherent in blockchains and crypto finance. This paper reviews some of the opportunities and risks.
Policy Hub , Volume 2022 , Issue 14

Journal Article
An Introduction to Web3 with Implications for Financial Services
Parlour, Christine (2023-05-15)
Web3 is used to describe the next iteration of the internet in which decentralized services are automated on blockchains. This paper describes the elements of Web3 including blockchains and tokens. It describes the largest decentralized finance protocols and some specific services where blockchain and tokens can be used. The paper concludes with a brief discussion of some regulatory challenges.
Policy Hub , Volume 2023 , Issue 3

Discussion Paper
The Origins of Market Power in DeFi
Azar, Pablo D.; Casillas, Adrian; Farboodi, Maryam (2025-04-21)
In our previous Liberty Street Economics post, we introduced the decentralized finance (DeFi) intermediation chain and explained how various players have emerged as key intermediaries in the Ethereum ecosystem. In this post, we summarize the empirical results in our new Staff Report that explains how the need for transaction privacy across the DeFi intermediation chain gives rise to intermediaries’ market power.
Liberty Street Economics , Paper 20250421

Report
Payment networks in a search model of money
Skeie, David R.; Orlando, Michael J.; Martin, Antoine (2006-10-01)
In a simple search model of money, we study a special kind of memory that gives rise to an arrangement resembling a payment network. Specifically, we assume that agents can pay a cost to access a central database that tracks payments made and received. Incentives must be provided to agents to access the central database and to produce when they participate in this arrangement. We also study policies that can loosen these incentive constraints. In particular, we show that a "no-surcharge" rule has good incentive properties. Finally, we compare our model with that of Cavalcanti and Wallace.
Staff Reports , Paper 263

Working Paper
Liquidity Provision and Co-insurance in Bank Syndicates
Kiernan, Kevin F.; Yankov, Vladimir; Zikes, Filip (2021-09-24)
We study the capacity of the banking system to provide liquidity to the corporate sector in times of stress and how changes in this capacity affect corporate liquidity management. We show that the contractual arrangements among banks in loan syndicates co-insure liquidity risks of credit line drawdowns and generate a network of interbank exposures. We develop a simple model and simulate the liquidity and insurance capacity of the banking network. We find that the liquidity capacity of large banks has significantly increased following the introduction of liquidity regulation, and that the ...
Finance and Economics Discussion Series , Paper 2021-060

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