Rashad Ahmed - Research

Stablecoins are money-like tokens residing on distributed ledgers that promise par convertibility to a sovereign unit of account, largely the US dollar. We model the strategic interaction between stablecoin holders and a stablecoin issuer, focusing on the role of transparency and public information about the reserves stablecoin issuers hold to lend credibility to their promise, as well as the perceived volatility of those reserves. The effect of public disclosure on run risk is ambiguous: Greater transparency can lead to increased (reduced) run risk for sufficiently low (high) stablecoin holders' priors about collateral quality or transaction costs of conversion to fiat. If the distribution of collateral assets is fat-tailed, reserves are highly volatile and the stablecoin can enter a "ripe for run" region: par convertibility is resilient to small shocks to collateral value but breaks down in the face of large negative public shocks, even for high initial collateral values. Using a synthetic control approach to address endogeneity concerns and several case studies, we find empirical support for the testable implications of the model.

Foreign-borne Interest Rate Risk

Deposit rates on dollar deposits held in foreign offices of US banks exhibit greater sensitivity to US monetary policy than domestic deposit rates, i.e., foreign deposit betas are larger than domestic deposit betas. The deposit beta premium on uninsured over insured deposits cannot fully account for the size of foreign deposit betas. Instead a substantial portion of the foreign deposit beta can be explained by the additional sensitivity of foreign deposit rates to foreign monetary policy. In aggregate, large foreign deposit betas bear macroeconomic and financial stability consequences, as foreign deposit dynamics can (i) alter US bank sector sensitivity to US monetary policy and (ii) open channels through which foreign monetary policy affects US financial conditions.

Sectoral Debt and Global Dollar Cycles in Developing Economies, with Joshua Aizenman, Bada Han and Yothin Jinjarak

We explore the role of sectoral debt dynamics in shaping business cycles in a sample of 52 Emerging Market Economies (EMEs) and Frontier Market Economies (FMEs) from 2005 to 2021. Higher household debt levels and growth are associated with significantly slower GDP growth in more developed EMEs but not in less developed EMEs and FMEs. We also examine the relationship between US dollar cycles, sectoral debt levels and growth, and economic activity. Among developed EMEs, higher expected household debt growth magnifies the impact of US dollar fluctuations on economic activity, with significant but less persistent effects on consumption and more persistent effects on investment. Our empirical findings highlight the important role of household debt dynamics in relatively developed EMEs.

Policy Reports and Other Papers

"Sectoral Debt Capacity and Business Cycles: Developing Asia and the World Economy", with J. Aizenman, B. Han, and Y. Jinjarak (2023), Report prepared for the Asian Development Bank
"What happens when Affordable Housing comes to my Back Yard: Evidence from Los Angeles", with A. Aristidou, M. Kahn, and E. Kwon (2018), Report prepared for the City of Los Angeles