Cashing In (and Out): Experimental Evidence on the Effects of Mobile Money in Malawi

By Shilpa Aggarwal, Valentina Brailovskaya, and Jonathan Robinson

AEA Papers and Proceedings, May 2020

We present results from a randomized control trial on access to mobile money with 480 entrepreneurs in Malawi. Treated individuals received account opening assistance and basic training on mobile money and were encouraged to save. Withdrawal fees were wai...

Financial Crises, Dollarization, and Lending of Last Resort in Open Economies

By Luigi Bocola and Guido Lorenzoni

American Economic Review, August 2020

Foreign currency debt is considered a source of financial instability in emerging markets. We propose a theory in which liability dollarization arises from an insurance motive of domestic savers. Since financial crises are associated to depreciations, sav...

Bitcoin: An Axiomatic Approach and an Impossibility Theorem

By Jacob D. Leshno and Philipp Strack

American Economic Review: Insights, September 2020

Bitcoin's main innovation lies in allowing a decentralized system that relies on anonymous, profit-driven miners who can freely join the system. We formalize these properties in three axioms: anonymity of miners, no incentives for miners to consolidate, a...

Crisis Management in Canada: Analyzing Default Risk and Liquidity Demand during Financial Stress

By Jason Allen, Ali Hortaçsu, and Jakub Kastl

American Economic Journal: Microeconomics, May 2021

Using detailed information from the Canadian interbank payments system and liquidity-providing facilities, we find that despite sustained increases in market-rate spreads, the increase in banks' willingness to pay for liquidity during the 2008–2009 fina...

Optimal Inflation Target in an Economy with Menu Costs and a Zero Lower Bound

By Andrés Blanco

American Economic Journal: Macroeconomics, July 2021

I study the optimal inflation target in a quantitative menu cost model with a zero lower bound on interest rates. I find that the optimal inflation target is 3.5 percent, which is higher than in models commonly used for monetary policy analysis. Key to th...

Money Mining and Price Dynamics

By Michael Choi and Guillaume Rocheteau

American Economic Journal: Macroeconomics, October 2021

We develop a random-matching model to study the price dynamics of monies produced privately according to a time-consuming mining technology. For our leading example, there exists a unique equilibrium where the value of money increases over time and reache...

An Equilibrium Model of the International Price System

By Dmitry Mukhin

American Economic Review, February 2022

What explains the central role of the dollar in world trade? Will the US currency retain its dominant status in the future? This paper develops a quantitative general equilibrium framework with endogenous currency choice that can address these questions...

The Microeconomics of Cryptocurrencies

By Hanna Halaburda, Guillaume Haeringer, Joshua Gans, and Neil Gandal

Journal of Economic Literature, September 2022

Since its launch in 2009 much has been written about Bitcoin, cryptocurrencies, and blockchains. While the discussions initially took place mostly on blogs and other popular media, we now are witnessing the emergence of a growing body of rigorous academ...

Empirical Studies of Financial Innovation: Lots of Talk, Little Action?

By W. Scott Frame and Lawrence J. White

Journal of Economic Literature, March 2004

This paper reviews the extant empirical studies of financial innovation. Adopting broad criteria and spanning a long time horizon, we found surprisingly few studies (39), with most (23) having been conducted since 1998. Especially striking is that only tw...

Financial Sanctions, SWIFT, and the Architecture of the International Payment System

[Symposium: Trade Sanctions and International Relations]

By Marco Cipriani, Linda S. Goldberg, and Gabriele La Spada

Journal of Economic Perspectives, Winter 2023

Financial sanctions, alongside economic sanctions, are components of the toolkit used by governments as part of international diplomacy. The use of sanctions, especially financial, has increased over the last 70 years. Financial sanctions have been part...

The Macroeconomic Consequences of International Financial Sanctions

By Javier Bianchi and Cesar Sosa-Padilla

AEA Papers and Proceedings, May 2023

Financial sanctions have emerged as powerful weapons in the current geopolitical landscape. In this paper, we use a graphical framework to trace their macroeconomic implications, highlighting lessons for the status of the US dollar as a reserve currency, ...

Financial Bubbles in Infinitely Repeated Auctions with Tokens

By Andrea Canidio

AEA Papers and Proceedings, May 2023

An auctioneer holds an infinite sequence of private value auctions. He can accept payments in a blockchain-based token that he creates and initially owns. I show that relative to a standard auction with dollars, the present-discounted value of the expecte...

"Quick Response" Economic Stimulus: The Effect of Small-Value Digital Coupons on Spending

By Jianwei Xing, Eric Yongchen Zou, Zhentao Yin, Yong Wang, and Zhenhua Li

American Economic Journal: Macroeconomics, October 2023

We study a new consumption stimulus program implemented by a large Chinese city that leverages mobile payment platforms to dispense massive amounts of small-value digital coupons. Exploiting a "rush" design of the dispensing process in which over 1 millio...

Cash Is Alive: How Economists Explain Holding and Use of Cash

By Oz Shy

Journal of Economic Literature, December 2023

Research on holding and use of cash involves many aspects, such as reasons for holding and hoarding cash, transactional demand for cash, cash management, type of spending paid with cash, type of consumer who pays cash, merchant acceptance, how consumers g...

Payment Arrangements and Inflation

By Edward J. Green

American Economic Review, May 2002

The Ends of 27 Big Depressions

By Martin Ellison, Sang Seok Lee, and Kevin Hjortshøj O'Rourke

American Economic Review, January 2024

How did countries recover from the Great Depression? In this paper, we explore the argument that leaving the gold standard helped by boosting inflationary expectations, lowering real interest rates, and stimulating interest-sensitive expenditures. We do s...

Digital Assets and the Exorbitant Dollar Privilege

By Marina Azzimonti and Vincenzo Quadrini

AEA Papers and Proceedings, May 2024

This paper analyzes how the rise of digital assets, particularly stablecoins, affects the US dollar's dominance in global financial markets. It discusses whether stablecoins, backed by US debt or other assets such as cryptocurrencies, could replace tradit...

Gender and Racial Behavior in Consumer Payment Methods under Economic Uncertainty

By Raffi E. Garcia and Jyothsna G. Harithsa

AEA Papers and Proceedings, May 2024

This paper analyzes the effects of high economic uncertainty on racial and gender behavior in payment methods. Using US consumer transaction-level data, we find that consumers alter their payment behavior patterns in periods of high economic uncertainty b...

The Optimal Quantity of CBDC in a Bank-Based Economy

By Lorenzo Burlon, Manuel A. Muñoz, and Frank Smets

American Economic Journal: Macroeconomics, October 2024

We show that the estimated effect of digital euro news on bank stock valuations and lending depends on the bank's deposit reliance and the central bank digital currency (CBDC) design features. Using a quantitative DSGE model calibrated to the euro area ec...

Financial Technology Adoption: Network Externalities of Cashless Payments in Mexico

By Sean Higgins

American Economic Review, November 2024

Do coordination failures constrain financial technology adoption? Exploiting the Mexican government's rollout of 1 million debit cards to poor households from 2009 to 2012, I examine responses on both sides of the market and find important spillovers and ...