Stability Implications of Nonbank Provision of Financial Services, Copenhagen, Working Papers
Demand for Safety in the Crypto Ecosystem, with Murillo Campello (Cornell University and University of Florida) , Lira Mota (MIT) and Tammaro Terracciano (IESE) - NBER Working Paper here
We study the demand for safety and liquidity in the crypto ecosystem. We do so under a framework in which a representative investor allocates liquidity across stablecoin deposits in lending pools and traditional safe assets (e.g., MMF shares). Our model delivers three main predictions: (i) the stablecoin deposit premium co-moves with the Treasury premium when investors value the safety and liquidity services of stablecoins; (ii) increases in Treasury supply reduce the stablecoin deposit premium; and (iii) drops in the perceived safety and liquidity of stablecoin deposits (e.g., due to de-pegs or hacker attacks) reduce their premium. Using granular data from hundreds of DeFi pools spanning multiple protocols, tokens, and blockchains, we find evidence supporting these predictions. Investors treat stablecoin deposits as money-like instruments that are borderless and permissionless, yet as fragile as other forms of privately produced safe assets.
Presented: 2026 EFA (expected), 2026 AFA, 2024 Fintech and Digital Currencies RPN Workshop, the 5th Crypto Asset Lab Conference, the Inaugural Future FinTech Federated Conference, the 7th Future of Financial Information at INSEAD, the BSE Summer Forum 2025 (Safety, Liquidity, and the Macroeconomy), the SNB–CIF Conference on Cryptoassets and Financial Innovation, the 32nd Finance Forum by the Spanish Finance Association, the Central Bank of Ireland–UCD–CEPR Conference on Macro-finance and financial stability policies, 4th Bonn/Frankfurt/Mannheim Workshop on Digital Finance, IESE Banking Initiative, Nova Business School, Imperial College Digital Conference, The Riksbank, Bank of Spain, 2026 CEBRA Annual Meeting, 2026 ToDeFi conference, and Third Conference on Stablecoins and Tokenization (Federal Reserve Boston).
SoS! The Overnight Bilateral Liquidity Provision of Non-Bank Financial Institutions to Banks, with A. Clare (Bayes), E. Cucullo (Bayes and Bank of England) - BoE Working Paper here
We study the UK bilateral overnight repo market to examine the liquidity provision of non-bank financial institutions (NBFIs) to banks. Using proprietary transaction-level data from the Bank of England, we document that NBFIs supply substantially more liquidity to banks than traditional interbank lenders, with weekly volumes six to twelve times greater than in the interbank market. To measure the relative pricing of liquidity across NBFIs and bank lenders, we introduce the Spread-of-Spread (SoS), defined as the difference between bank–NBFI and interbank repo spreads. On average, we observe a stable and negative SoS (-7 bps) before 2022, indicating that banks borrowed from NBFIs at lower rates than from other banks. After 2022, the SoS is highly volatile and on average largely positive (+10 bps), suggesting that NBFI liquidity became more expensive for banks. Studying the opportunity cost associated with the onset of monetary tightening, we find that tighter monetary conditions raise SoS across NBFIs. The effect is primarily through volatility rather than mean shifts and is more persistent for money market funds and insurers, whereas investment funds and pension funds respond more sharply but stabilise more quickly.
Presented: Stability Implications of Nonbank Provision of Financial Services 2026, Copenhagen, Bank of Denmark (expected), Banque de France Empirical Corporate Finance Workshop 2026 (expected), Board of Governors of the Federal Reserve System, European Central Bank, Bank of Japan, Federal Reserve Bank of Boston, Bank of England, Finance FORUM 2026.
China's Savings Glut and Investors Hunt for Safe Assets, with V. Ioannidou (Bayes), Nicole Gao ( University of Bristol) - SSRN Working Paper here
The surge in China’s middle-class wealth, coupled with high savings rates, has exacerbated the demand-supply disparity for safe assets. Our analysis reveals that Chinese T-Bills carry significant safety premia, consistent with excess demand for public safe assets. Employing granular contract-level data on wealth management products (WMPs) issued by banks in China between 2012 and 2020, we find that investors treat WMPs with short maturities as substitutes for public safe assets (Chinese T-Bills and US T-Bills). Holding maturity constant, we find that retail investors are willing to pay safety premia on WMPs only if issued by government-owned banks. These results underscore that investors’ demand is driven by a need for safety rather than liquidity.
Presented: ABS-Wharton Workshop Safety vs. Liquidity Demand, the BSE Summer Forum Workshop on Safety, Liquidity, and the Macroeconomy, the 10th BdF-BoE-BdI International Macroeconomics Workshop, and Bayes Business School.
Interest Rate Hikes, Collateral Deterioration, and Search for Yield: Evidence from Shadow Banks with B. Casu (Bayes) - New draft Coming soon
We study the transmission of monetary policy to shadow banks through changes in collateral quality. Using a novel dataset on collateral transactions in Asset-Backed Commercial Paper (ABCP) conduits, we show that increases in interest rates lead conduits to expand the issuance of short-term liabilities despite higher funding costs, conditional on investor demand. This expansion is sustained by increased collateral purchases that tilt toward lower rating (but within the investment grade range) and more opaque credit assets (e.g., structured assets). This response weakens funding resilience and increases fragility to runs. Our findings provide direct evidence of a collateral risk-taking channel through which monetary policy transmits risk to nonbank credit intermediation.
Gallo, A. and Park, M.K. (2026). Financing Green Transition: Bank-Nonbank Partnerships. Journal of Financial Intermediation. Volume 65, 101193.
Bracci, A., Nadini, M., Aliapoulios, M., McCoy, D., Gray, I., Teytelboym, A. … Baronchelli, A. (2022). Vaccines and more: The response of Dark Web marketplaces to the ongoing COVID-19 pandemic. PLOS ONE, 17(11). doi:10.1371/journal.pone.0275288.
Gallo, A. and Park, M.K. (2022). CLO (Collateralized Loan Obligation) Market and Corporate Lending. Journal of Money, Credit and Banking. doi:10.1111/jmcb.12941.
Arnaboldi, F., Casu, B., Gallo, A., Kalotychou, E. and Sarkisyan, A. (2021). Gender diversity and bank misconduct. Journal of Corporate Finance, 71, pp. 101834–101834. doi:10.1016/j.jcorpfin.2020.101834.
Bracci, A., Nadini, M., Aliapoulios, M., McCoy, D., Gray, I., Teytelboym, A. … Baronchelli, A. (2021). Dark Web Marketplaces and COVID-19: before the vaccine. EPJ Data Science, 10(1). doi:10.1140/epjds/s13688-021-00259-w.
Lucchini, L., Alessandretti, L., Lepri, B., Gallo, A. and Baronchelli, A. (2020). From code to market: Network of developers and correlated returns of cryptocurrencies. Science Advances, 6(51). doi:10.1126/sciadv.abd2204.
Other Publications are in "About" page (CV).
