WPs & Work in Progress

We estimate the uninsured deposit premium – the difference between the rates paid on uninsured versus insured deposits – by linking observed average deposit rates to an estimated share of uninsured deposits. Using U.S. bank data from 1991 to 2025, we show that the average uninsured deposit premium rose by nearly 400 basis points over this period. This rise reflects both falling insured deposit rates and rising uninsured deposit rates. We find a strong correlation with the monetary policy cycle: a one-percentage-point increase in the Federal Funds Rate corresponds to a rise of roughly 32 basis points in the uninsured deposit premium. We develop a bargaining model between banks, insured depositors, and uninsured depositors that explains these dynamics.

This paper documents a new dollar channel that transmits monetary policy across borders. Exploiting unique features of the syndicated loan market for identification, we show that changes in the euro-dollar exchange rate around ECB monetary policy announcements that are orthogonal to simultaneous changes in euro-area interest rates and stock prices affect U.S. leveraged loan spreads. Specifically, in response to dollar appreciation, investors require higher compensation for risk, and borrowing costs for U.S. firms increase. These findings imply a causal link between the U.S. dollar and investors’ risk appetite.

Letters of credit are a key trade finance instrument that covers more than 10 percent of global trade, with a notably larger role in low and middle income economies. Studying detailed trade data from Viet Nam, we document how letter of credit use varies with firm characteristics. We show that the probability of using a letter of credit is systematically lower for younger, smaller and foreign-owned firms. Less experienced and diversified importers are more likely to use letters of credit but experience has a more muted effect on exporters. These patterns are consistent with a model in which the ability to screen trading partners and the cost of bank intermediation vary with firm characteristics. Any policy or intervention that aims at increasing the use of bank-intermediated trade finance will therefore need to take firm heterogeneity into account.

Exploiting transaction-level international trade data, this paper documents new facts about trade credit. Trade credit use increases with firm-to-firm relationship length, an effect that varies with countries’ rule of law, and is stronger for trade in more complex products and trade between unrelated parties. A model featuring diversion risk, learning, and a financing cost advantage of trade credit can rationalize these patterns. Initially, payment risk is a key factor limiting trade credit use. Through learning, this risk declines and firms switch to trade credit. Long-term trade relationships give rise to a financial benefit: saving financing costs through trade credit.

This paper provides evidence on the effect of the dollar exchange rate on international trade prices, employing a new instrument for the U.S. dollar based on U.S. domestic housing activity (Ma and Zhang (2019)). In line with the dominant currency paradigm (Gopinath et al. (2020)), when instrumenting the dollar, we find evidence for a perfect pass-through of the dollar exchange rate to import prices that are invoiced in dollars.