Research

Working papers

FX Hedging, Currency Choice, ERPT, and the International role of the US Dollar (2020) - draft coming soon


ABSTRACT:

Using a unique dataset on French customs declarations and OTC FX transactions, I shed light on the role of FX forward markets on export currency choice, the international role of the US dollar, and thus on exchange-rate pass-through into prices. FX Hedging firms have 28% more chances of using destination (local) currency pricing (LCP), and 40% more chances of using vehicle (third) currency pricing (VCP), even after controlling for a large set of fixed effects. Furthermore, FX Hedging firms have 47% higher chances to use the US dollar. All the results above strongly hold to the introduction of firm fixed effects. I also show that FX hedging firms differ in adjusting their prices to currency shocks. The pass-through of FX hedging firms using dollar pricing is lower than the one of non hedging firms. By contrast, the pass-through of FX hedging firms using local currency pricing is higher than the one of non hedging firms. Moreover, FX hedging firms using LCP have the same elasticity of non-hedging firms using PCP. Finally, as expected, the elasticity does not differ for products denominated in euro.

Central Bank Digital Currency and Balance Sheet Policy (2020), with M. Fraschini and L. Somoza


ABSTRACT:
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.

OTC Markets and Corporate FX Hedging (2019), with H. Hau and S. Langfield


ABSTRACT:

New evidence shows substantial price discrimination in FX derivative markets between sophisticated and less-sophisticated non-financial firms (Hau et al., 2017). This market distortion potentially discourages many firms from hedging FX risks. This paper seeks to investigate the link between firms’ hedging activities and their expected hedging costs. Furthermore, we are interested in quantifying the welfare impact of a more competitive FX forward market. Understanding this issue has relevant policy implications for designing a better functioning derivative market that better serves the real economy.

Published papers

Stabilizing Stablecoins: Proposal for a Pragmatic Regulatory Approach, with L. Somoza, The Journal of FinTech (forthcoming)


MEDIA COVERAGE: VoxEU.org , Financial Times - Alphaville, Cointelegraph, Il Sole 24 Ore .
ABSTRACT:

We propose a framework for regulating stablecoins as a new asset class. We define 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. Hence, we argue that locking 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 framework.

Work in progress

  • Safe Asset and Financial Inclusion: Lessons for CBDCs?

  • Talk is cheap: a textual analysis of firms’ CSR claims