Nominal Exchange Rate Determinacy under the Threat of Currency Counterfeiting

By Pedro Gomis-Porqueras, Timothy Kam, and Christopher Waller

American Economic Journal: Macroeconomics, April 2017

We study the endogenous choice to accept fiat objects as media of exchange and their implications for nominal exchange rate determination. We consider a two-country environment with two currencies that can be used to settle any transactions. However, curr...

Liquidity: A New Monetarist Perspective

By Ricardo Lagos, Guillaume Rocheteau, and Randall Wright

Journal of Economic Literature, June 2017

This essay surveys the new monetarist approach to liquidity. Work in this literature strives for empirical and policy relevance, plus rigorous foundations. Questions include: What is liquidity? Is money essential in achieving desirable outcomes? Which obj...

International Monetary Relations: Taking Finance Seriously

[Symposium: The Global Monetary System]

By Maurice Obstfeld and Alan M. Taylor

Journal of Economic Perspectives, Summer 2017

In this essay, we highlight the interactions of the international monetary system with financial conditions, not just with the output, inflation, and balance of payments goals usually discussed. We review how financial conditions and outright financial cr...

The Safe Assets Shortage Conundrum

[Symposium: The Global Monetary System]

By Ricardo J. Caballero, Emmanuel Farhi, and Pierre-Olivier Gourinchas

Journal of Economic Perspectives, Summer 2017

A safe asset is a simple debt instrument that is expected to preserve its value during adverse systemic events. The supply of safe assets, private and public, has historically been concentrated in a small number of advanced economies, most prominently t...

Dealing with Monetary Paralysis at the Zero Bound

[Symposium: The Global Monetary System]

By Kenneth Rogoff

Journal of Economic Perspectives, Summer 2017

Recently, the key constraint for central banks is the zero lower bound on nominal interest rates. Central banks fear that if they push short-term policy interest rates too deeply negative, there will be a massive flight into paper currency. This paper...

The Potential of Digital Credit to Bank the Poor

By Daniel Björkegren and Darrell Grissen

AEA Papers and Proceedings, May 2018

Many households in developing countries lack access to credit: physically providing small loans to poor and remote populations is costly. However, the digitization of developing countries enables a new model: digital credit delivered directly via mobile p...

Digital Financial Services Go a Long Way: Transaction Costs and Financial Inclusion

By Pierre Bachas, Paul Gertler, Sean Higgins, and Enrique Seira

AEA Papers and Proceedings, May 2018

Debit cards reduce the travel distance to access bank accounts and can increase financial inclusion. We show that in Mexico, cash transfer beneficiaries who already received their transfers in bank accounts and subsequently received debit cards reduce the...

Finance and Economic Development in the Very Long Run: A Review Essay

By Yongseok Shin

Journal of Economic Literature, December 2018

I review William N. Goetzmann's Money Changes Everything: How Finance Made Civilization Possible. This magnificent book offers insightful coverage of more than 5,000 years of human history under the theme of "how finance made civilization possi...

The Case for Imposing Cashlessness: A Review Article

By Neil Wallace

Journal of Economic Literature, December 2018

In The Curse of Cash, Rogoff (2016) makes two arguments. (i) Large denominations of currency are primarily used for illegal activity. Therefore, eliminating them would have benefits that far outweigh the costs in terms of lost seigniorage. (ii)...

Partners or Strangers? Cooperation, Monetary Trade, and the Choice of Scale of Interaction

By Maria Bigoni, Gabriele Camera, and Marco Casari

American Economic Journal: Microeconomics, May 2019

We show that monetary exchange facilitates the transition from small to large-scale economic interactions. In an experiment, subjects chose to play an "intertemporal cooperation game" either in partnerships or in groups of strangers where payoffs could be...

Currency Substitution under Transaction Costs

By Linda M. Schilling and Harald Uhlig

AEA Papers and Proceedings, May 2019

We consider a setting where agents can choose between two currencies to conduct their goods purchases. The usage of either currency comes with currency-specific transactions costs. For example, purchasing some goods with cryptocurrencies rather than dolla...

Blockchains, Coordination, and Forks

By Bruno Biais, Christophe Bisière, Matthieu Bouvard, and Catherine Casamatta

AEA Papers and Proceedings, May 2019

Blockchains are distributed ledgers. Their protocol aims at ensuring that the miners in charge of recording transactions reach a consensus about a unique ledger. In this paper, we highlight that the game induced by the blockchain proof-of-work protocol ge...

An Economist's Perspective on the Bitcoin Payment System

By Gur Huberman, Jacob D. Leshno, and Ciamac Moallemi

AEA Papers and Proceedings, May 2019

The paper's introduction offers a high-level review of Bitcoin's features, especially its governance by protocol. The paper proceeds to summarize Bitcoin's analysis as a payment system. It pays particular attention to a comparison between Bitcoin and a fi...

Price Discovery in Cryptocurrency Markets

By Igor Makarov and Antoinette Schoar

AEA Papers and Proceedings, May 2019

We ask which markets drive bitcoin prices and how price discovery happens across different exchanges. Does the greater exuberance for cryptocurrencies outside the United States affect prices only on local markets or does it impact price formation on globa...

China versus the United States: IMS Meets IPS

By Emmanuel Farhi and Matteo Maggiori

AEA Papers and Proceedings, May 2019

Currently both the International Monetary System (IMS) and the International Price Systems (IPS) are dominated by the United States. The emergence of China, both as reserve currency and as a currency of invoicing, is likely to disrupt this status quo. We ...

The Rise of the Dollar and Fall of the Euro as International Currencies

By Matteo Maggiori, Brent Neiman, and Jesse Schreger

AEA Papers and Proceedings, May 2019

International currencies play important roles as foreign exchange reserves but are also most frequently used to denominate corporate and government bonds, bank loans, and import and export invoices. These currencies offer unrivaled liquidity, constituting...

Dollar Invoicing and the Heterogeneity of Exchange Rate Pass-Through

By Emine Boz, Gita Gopinath, and Mikkel Plagborg-Møller

AEA Papers and Proceedings, May 2019

We show empirically that the variation across country pairs in exchange rate pass-through and trade elasticity is meaningfully explained by the dollar's dominance as invoicing currency. We use a hierarchical Bayesian approach to directly and flexibly mode...

The Great Indian Demonetization

[Symposium: Economics of India]

By Amartya Lahiri

Journal of Economic Perspectives, Winter 2020

On November 8, 2016, India demonetized 86 percent of its currency in circulation. The stated objectives of the move were to seize undeclared income, to destroy counterfeit currency, to speed up formalization of the economy, and to increase the tax base. I...

Migration, Money Transfers, and Mobile Money: Evidence from Niger

By Jenny C. Aker, Silvia Prina, and C. Jamilah Welch

AEA Papers and Proceedings, May 2020

Mobile money can reduce the cost of sending remittances as compared with traditional money transfer systems. Despite remittances being a crucial part of the West African economy, mobile money is failing to take off. We use supply and demand data for money...

Adopting Mobile Money: Evidence from an Experiment in Rural Africa

By Catia Batista and Pedro C. Vicente

AEA Papers and Proceedings, May 2020

Who uses mobile money, and what do people do with it? This paper describes mobile money adoption patterns following the experimental introduction of mobile money for the first time in rural areas of Southern Mozambique. We use administrative and household...