Working Papers:
Working Papers:
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(1) When Banks Retreat: The Demand for Public Safe Assets (Draft coming soon...), joint with Jialu Sun, Job Market Paper
(1) When Banks Retreat: The Demand for Public Safe Assets (Draft coming soon...), joint with Jialu Sun, Job Market Paper
Presented at: AFA 2027 Poster (Scheduled), FMA Asia-Pacific 2026 (Scheduled), LSE Finance, Northwestern Kellogg Finance
Abstract: This paper shows that quarter-end bank window dressing creates an imperfect substitution channel from private to public safe money-like assets. Around regulatory reporting dates, foreign banks reduce borrowing from U.S. money market funds; constrained to hold short-term, high-quality assets, the funds redeploy the displaced cash into Treasury bills. As a result, short-maturity U.S. Treasury yields fall by 3--9 basis points at quarter-ends. Using a network shift-share design that exploits predetermined fund--bank relationships and cross-sectional variation in Treasury bill holdings across funds, we causally estimate that money market fund demand inflows equal to 1 percent of Treasury bill market value lower yield spreads by 4.9 basis points. We use these estimates to quantify the additional public safe asset provision needed to stabilize Treasury bill yields at quarter-ends and to inform policy recommendations for the existing ON RRP facility.
Abstract: This paper shows that quarter-end bank window dressing creates an imperfect substitution channel from private to public safe money-like assets. Around regulatory reporting dates, foreign banks reduce borrowing from U.S. money market funds; constrained to hold short-term, high-quality assets, the funds redeploy the displaced cash into Treasury bills. As a result, short-maturity U.S. Treasury yields fall by 3--9 basis points at quarter-ends. Using a network shift-share design that exploits predetermined fund--bank relationships and cross-sectional variation in Treasury bill holdings across funds, we causally estimate that money market fund demand inflows equal to 1 percent of Treasury bill market value lower yield spreads by 4.9 basis points. We use these estimates to quantify the additional public safe asset provision needed to stabilize Treasury bill yields at quarter-ends and to inform policy recommendations for the existing ON RRP facility.
Presented at: AEA 2026, Bank of England, LBS Economics, LSE Finance and Macro, Imperial College, CEPR Fintech and Digital Currencies RPN 2025, Hitotsubashi, Tinbergen Institute, Utah Winter Finance Conference 2026, Wharton Liquidity conference 2025, FTG Summer Session 2025
Abstract: This paper examines the role of platform-issued money in shaping digital marketplace competition against a legacy fiat market. We show that platform money kickstarts network effects in two-sided markets, complements core matching services, and strengthens market power. This monetary policy is disciplined internally by the users' demand elasticity, and externally by legacy inflation, anchoring the issuer to an inflation markup over the Friedman rule. We further demonstrate that platform money improves welfare when the issuer possesses superior matching technology. Consequently, a competitive public currency, such as a Central Bank Digital Currency, can structurally constrain the platform's monopoly pricing power. Finally, we show that platforms may optimally reject outside money to strategically segment the user base, softening competition with the legacy market to extract higher seigniorage.
Abstract: This paper examines the role of platform-issued money in shaping digital marketplace competition against a legacy fiat market. We show that platform money kickstarts network effects in two-sided markets, complements core matching services, and strengthens market power. This monetary policy is disciplined internally by the users' demand elasticity, and externally by legacy inflation, anchoring the issuer to an inflation markup over the Friedman rule. We further demonstrate that platform money improves welfare when the issuer possesses superior matching technology. Consequently, a competitive public currency, such as a Central Bank Digital Currency, can structurally constrain the platform's monopoly pricing power. Finally, we show that platforms may optimally reject outside money to strategically segment the user base, softening competition with the legacy market to extract higher seigniorage.
(3) Cheap Funding, Fragile Ties: Lending Relationships in Money Markets (Draft coming soon ...)
(3) Cheap Funding, Fragile Ties: Lending Relationships in Money Markets (Draft coming soon ...)
Abstract: This paper finds short-term unsecured borrowers pay around 10 percent lower rates to newly connected money market funds lenders than to their established ones. This discount is not fully explained by observed contract characteristics or borrower-wide bargaining advantages, and we find no robust support for a fund diversification motive. New relationships also is associated with smaller loans, shorter uninterrupted lending spells, and faster declines in lending within the initial relationship. A natural experiment on MMF reform finds that newcomers are 14.52 percentage points more likely to be cut fundings than establishers. These findings leave funding reliability as the plausible explanation: established lenders may earn a premium for providing more persistent funding.
Abstract: This paper finds short-term unsecured borrowers pay around 10 percent lower rates to newly connected money market funds lenders than to their established ones. This discount is not fully explained by observed contract characteristics or borrower-wide bargaining advantages, and we find no robust support for a fund diversification motive. New relationships also is associated with smaller loans, shorter uninterrupted lending spells, and faster declines in lending within the initial relationship. A natural experiment on MMF reform finds that newcomers are 14.52 percentage points more likely to be cut fundings than establishers. These findings leave funding reliability as the plausible explanation: established lenders may earn a premium for providing more persistent funding.
(4) The Price of Balance-Sheet Warehousing: Quarter-End Dislocations in U.S. Money Markets and the Limits to Arbitrage [Paper], joint with Kathy Yuan
(4) The Price of Balance-Sheet Warehousing: Quarter-End Dislocations in U.S. Money Markets and the Limits to Arbitrage [Paper], joint with Kathy Yuan
Abstract: At each quarter-end, U.S. Treasury bill yields fall and secured funding rates rise by predictable amounts, about 3 to 9 basis points for the one-month bill and 10 basis points for the SOFR−IORB spread, and both reverse within days. We argue that this recurring anomaly is the price of dealer balance-sheet warehousing. Because the leverage ratio is measured on the reporting date, intermediaries pull back the balance-sheet capacity that links cash lenders to collateral, and bill and repo prices move by the implicit cost of that scarce capacity. The anomaly is not a mispricing but an access rent: it survives because the agents who could trade it away face the highest balance-sheet cost precisely when it appears. We demonstrate these findings by evaluating the risk, return, and executability of the trading strategies available to capture the anomaly on 2012–2026 data. The cost is borne by cash investors and by leveraged holders of Treasuries. The only widely accessible implementation of the trade is a position in SOFR futures, but a turn premium estimated from the one-month contract is indistinguishable from zero, and slightly negative net of transaction costs. Because the futures market prices the calendar effect in advance, the trade that requires no balance sheet earns no excess return.
Abstract: At each quarter-end, U.S. Treasury bill yields fall and secured funding rates rise by predictable amounts, about 3 to 9 basis points for the one-month bill and 10 basis points for the SOFR−IORB spread, and both reverse within days. We argue that this recurring anomaly is the price of dealer balance-sheet warehousing. Because the leverage ratio is measured on the reporting date, intermediaries pull back the balance-sheet capacity that links cash lenders to collateral, and bill and repo prices move by the implicit cost of that scarce capacity. The anomaly is not a mispricing but an access rent: it survives because the agents who could trade it away face the highest balance-sheet cost precisely when it appears. We demonstrate these findings by evaluating the risk, return, and executability of the trading strategies available to capture the anomaly on 2012–2026 data. The cost is borne by cash investors and by leveraged holders of Treasuries. The only widely accessible implementation of the trade is a position in SOFR futures, but a turn premium estimated from the one-month contract is indistinguishable from zero, and slightly negative net of transaction costs. Because the futures market prices the calendar effect in advance, the trade that requires no balance sheet earns no excess return.
Work-in-Progress:
Work-in-Progress:
(6) Foreign Exchange Intervention: Evidence from Bank of Japan, joint with Kathy Yuan and Tomohiro Tsuruga
(6) Foreign Exchange Intervention: Evidence from Bank of Japan, joint with Kathy Yuan and Tomohiro Tsuruga
(7) U.S. Dealer Banks on FX Swap Market, joint with Tomohiro Tsuruga, Andrea Deghi, and Taneli Mäkinen
(7) U.S. Dealer Banks on FX Swap Market, joint with Tomohiro Tsuruga, Andrea Deghi, and Taneli Mäkinen
Policy Paper:
Policy Paper:
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