The rapid expansion of cryptocurrency markets has intensified interactions between digital assets and traditional financial institutions, raising important questions about the implications of cryptocurrency-related uncertainty for banking activities. This paper investigates how cryptocurrency uncertainty shapes banks' funding, lending, and risk-taking decisions. Using a panel of 8,330 banks across 129 countries over the period 2009–2018, we examine the relationship between cryptocurrency uncertainty and key dimensions of banks' balance-sheet decisions. We find that heightened cryptocurrency uncertainty increases customer deposits while reducing lending activity, non-performing loans, and risk-weighted assets. These findings suggest that banks respond to cryptocurrency uncertainty by adopting more conservative balance-sheet decisions characterized by stronger funding positions, lower credit expansion, and reduced risk exposure. The results remain robust to alternative measures of cryptocurrency uncertainty and lending activity. Our findings highlight that cryptocurrency uncertainty generates significant spillover effects on traditional financial intermediation and should be incorporated into macroprudential surveillance frameworks.
We challenge the narrative of idle monetary transmission in Pakistan. By cleansing conventional policy measures of anticipatory and endogenous motives à la Romer and Romer (2004), and using local projections in long differences (Jordá and Taylor, 2025; Piger and Stockwell, 2025), Piger and Stockwell, 2025], we trace the effects of monetary shocks on macroeconomic and financial outcomes while controlling for the global financial cycle (Miranda-Agrippino and Rey, 2020). A contractionary shock generates a large and persistent output contraction and a significant, non-monotone response of year-on-year inflation, with disinflation on impact and again after eight to nine quarters. The policy rate rises in the short run, while term-spread and credit responses are economically coherent but less precisely estimated. US monetary spillovers are small and statistically imprecise. Monetary policy works in Pakistan; only its measurement was idle.
This paper studies a tax on tourism services, collected from foreign visitors upon entry, in a two-sector small open economy with congestible public infrastructure. Lerner symmetry implies that the tax raises manufacturing’s relative price and reverses tourism-driven Dutch disease. Tourism tax revenue lowers resident income taxes, while the contraction in tourism output reduces congestion, generating a double dividend.
This paper analyzes the macroeconomic consequences of bank market power under corporate earnings-based borrowing constraints. By embedding a Cournot banking structure within a Kiyotaki-Moore framework, we uncover a sharp structural reversal: while credit market power dampens the fire-sale multiplier under traditional asset-backed constraints, it amplifies that multiplier under earnings covenants. The endogenous lending markup directly inflates debt-service obligations, tightening borrowers’ cash-flow constraints, forcing deeper asset misallocations and severe aggregate output contractions. Fostering banking competition and relaxing countercyclical covenants act as structural complements, compressing spreads and maximizing real capital retention during financial distress.
When a central bank buys lower inflation with unemployment, does it get fewer price increases or more price cuts? We answer this for the United States by decomposing the Phillips multiplier — the cumulative inflation response to a monetary shock that raises unemployment by one percentage point — into its two directional margins, using 245 disaggregated PCE sub-indices and identified monetary shocks. Before 1990, a one-point rise in the cumulative unemployment gap raises deflationary pressure by 0.4pp: the trade-off runs through price cuts. After 1990, excluding the zero lower bound, weak instruments identify neither the multiplier nor either margin.
Access to space is now a national security priority, yet its cost varies enormously across nations. Using a novel dataset of over 6740 rocket launches (1960–2025), we estimate country-level launch costs and country-specific experience curves. In 2025, the average costs per kilogram to Low Earth Orbit ranged from $3225 in the United States to over $13,000 in India, with Europe, Russia, China, and Japan in between. Since 2010, only the US and Europe display statistically significant experience curves, with the US improving far faster. These widening asymmetries reinforce strategic dependencies with economic and security implications.
This note studies a pure fertility-timing reform in a three-period OLG model. Holding completed fertility fixed, shifting births from middle age to youth raises the balanced-growth factor if N>1, lowers it if N<1, and leaves it unchanged if N=1. The same positive balanced-growth root λ determines cohort growth, the cohort ratio, and the steady-state PAYG support ratio λ2+λ. Thus the long-run support-ratio effect, and under an exogenous wage the pension-benefit effect, are positive in growing populations and negative in shrinking ones.
Reduced-form bequest motives are routinely assumed to exhibit decreasing absolute risk aversion (DARA). I show this is consistent with an underlying altruistic primitive: when descendant risk is unrealised at the bequest choice date, DARA of the warm-glow preference is inherited from the descendant’s continuation value under both multiplicative and additive risk, without parametric restriction. Yet the two canonical specifications differ in what is preserved beyond DARA. Multiplicative risk yields a shifter-weight decomposition and preserves CRRA form; additive income risk—the relevant case for dynastic precautionary savings—preserves DARA but not functional form.
A representative chooses policy on behalf of a group with heterogeneous preferences. Group members differ in voice (their salience to the representative). The representative maximizes perceived welfare based on a voice-weighted signal. The resulting policy distortion is proportional to the covariance between voice and preferences. When agents choose voice effort endogenously, equilibrium voice is U-shaped (quadratic in distance between preferences and policy). The equilibrium distortion is approximately one-third of a standard deviation times the skewness coefficient. It is non-zero only when the preference distribution is skewed. Combining the voice-weighted signal with a random sample can reduce the expected welfare loss.
Researchers often include unit-specific (e.g., state-specific) trends in difference-in-differences (DiD) specifications. Under standard DiD assumptions, these specifications still yield consistent estimates of dynamic treatment effects (i.e., separate effects for each post-treatment time period) but the pooled post-treatment coefficient is not consistent for the average treatment effect. This single coefficient is a weighted average of the dynamic coefficients, but some weights are often negative. This occurs even without a staggered rollout of treatment. Instead of estimating a pooled coefficient, researchers can estimate the average treatment effect as the mean of the dynamic effects.
This paper studies how demand curvature limits first-mover advantage and shapes surplus division in a Stackelberg duopoly facing α-concave demand for α∈[−1,∞). Under constant symmetric marginal costs, I prove that across all possible equilibria, the leader-to-follower profit ratio is at least 1+5+4α2. Thus, the leader is guaranteed to earn at least 61.8% more than the follower under log-concave demand (α=0) and at least twice as much under concave demand (α=1). Under demand with decreasing marginal revenue (α=−1), the leadership advantage persists. I further derive a lower bound for the leader’s profit alongside an upper bound for deadweight loss. Extremal demand curves D for which Dα and lnD are affine attain all bounds for α>−1.
We extend the heteroskedasticity IV estimator of Rigobon and Sack (2004) to multiple monetary policy shocks by imposing recursive zero restrictions on the impact matrix. Unlike high-frequency identification, the approach requires neither intraday tick data nor precise announcement timestamps, making it applicable to countries and historical periods where such data are unavailable. Applied to US FOMC announcements, we find causal effects similar to those of high-frequency identification. The heteroskedasticity-based instrument passes weak-instrument tests for the target shock, whereas results are mixed for high-frequency surprises. For the path shock, we obtain strong instruments for the majority of specifications and the underlying shock series is highly correlated with the high-frequency counterpart.
Empirical evidence shows that environmental, social, and governance (ESG) quality interacts with financial performance at the individual asset level: high-ESG firms outperform during crises and corporate social responsibility lowers systematic beta. Models with separable ESG preferences generate a greenium but no such interaction. We develop a capital asset pricing model (CAPM) with supermodular preferences over each asset’s return and ESG score. The equilibrium features an asset-specific denominator that compresses expected returns for high-ESG assets and generates a negative beta-ESG interaction, implying lower effective market sensitivity for green firms. We show that portfolio-level complementarity cannot produce this interaction, which yields a sharp test distinguishing our mechanism in the data. The model offers one rationalization of the beta-ESG interaction. We illustrate its quantitative content with four empirical studies.
Paid sick leave mandates aim to improve employee benefits. This paper examines how firms respond to the additional labor costs caused by PSL mandates. Leveraging the staggered implementation of PSL mandates across U.S. states, we use a difference-in-differences design and find that mandatory PSLs greatly accelerate firms’ adoption of automation. This effect is particularly evident among labor-intensive firms, consistent with the view that rising employment costs drive labor-capital substitution. Overall, by revealing an unintended consequence of PSL mandates, this study contributes to the pertinent literature and has important policy implications.
