Central Bank Digital Currency and Balance Sheet Policy (2021), with M. Fraschini and T. Terracciano
We study the equilibrium effects of the introduction of a CBDC under different monetary policy regimes: standard policy, where the central bank holds treasuries; and quantitative easing-interest rate policy, where it invests in risky securities and sets the interest rate on treasuries. In our setting, the central bank can use CBDC deposits to either hold government bonds or to buy risky securities, in so changing the equilibrium of the economy. The main mechanism underlying the analysis is the reduction in bank deposits and its impact on bank’s funding, which in turn impacts risky investments and taxes. We find that the outcomes depend on both the existing regime and the use of CBDC deposits. The model suggests that investing CBDC deposits in risky securities leads to lower, but more volatile, taxes. On the other hand, investing CBDC deposits in government bonds can have a positive impact on bank lending.
We document abnormal correlations between the performance of hedge funds' managers with an elite socio-economic background. In particular, Columbia, Harvard, University of Pennsylvania, Stanford, and NYU alumni are highly correlated among themselves. We take steps toward linking this phenomenon to a shared information pool with a quasi-natural experiment: the 2009 Galleon Capital insider trading scandal. The difference-in-difference analysis shows a significant reduction in returns of the elite managers following the scandal. Finally, we present evidences suggesting that investors recognize this pool's value, as funds with access to elite information are associated with 55\% higher assets under management at launch.
We propose a framework for regulating stablecoins as a new asset class. We de- fine stablecoins as those digital currencies which are centrally managed and backed by other assets. We compare stablecoins and ETFs under the principle that similar risks should be treated in a similar fashion (FINMA 2019). Hence, we propose to lock stablecoins into an ETF-like structure, along with restrictions on the basket composition, would significantly reduce regulatory concerns. Stablecoin providers would be functionally similar to ETF sponsors and stablecoins would be a new vehicle for traditional fiat currencies.
Finally, we address common macroeconomic concerns in light of our proposed frame- work.
"The real effects of capital and liquidity requirements" (2019)
In this paper, I study the effects of capital and liquidity requirements in terms of credit to the economy, loans riskiness, and the probability of a bank run. To this end, I build, solve and calibrate a model of banking, where a representative bank receives insured deposits, borrows runnable debt, issues loans and purchases risk-free securities. The bank’s creditors can withdraw their credit when the fundamentals of the bank are weak. The bank faces unregulated, price-taker, shadow banks which decrease its profitability while increasing the return of the borrower. I find that high capital requirements decrease lending, increase the riskiness of loans and increase the market share of the shadow banking sector. On the other hand, liquidity requirements have little real effects. They do, however, mitigate the impact of tight capital requirements by significantly reducing the probability of runs when raised above 110%.