Does the federal funds rate respond to shocks when aggregate reserves are in the trillions of dollars? Has banks’ demand for reserves moved over time? We provide a structural time-varying estimate of the slope of the reserve demand curve over 2010-21. We estimate a time-varying vector...

This paper characterizes the run behavior of sophisticated (institutional) and unsophisticated (retail) investors by studying the runs on prime money market funds (MMFs) of March 2020, at the beginning of the COVID-19 pandemic. For both U.S. and European institutional prime MMFs, the runs were...

To combat the financial crisis that intensified in the fall of 2008, the Federal Reserve injected a substantial amount of liquidity into the banking system. The resulting increase in reserve balances exerted downward price pressure in the federal funds market, and the effective federal funds...

This article designs a framework for evaluating the causes, consequences, and future implications of financial services industry consolidation, reviews the extant research literature within the context of this framework (over 250 references), and suggests fruitful avenues for future research....

We examine the diffusion of real-time gross settlement (RTGS) technology across all 174 central banks. RTGS reduces settlement risk and facilitates financial innovation in the settlement of foreign exchange trades. In 1985, only three central banks had implemented RTGS systems, and by year-end...

The medieval banks of continental Europe facilitated trade by serving as payment intermediaries. Depositors commonly would pay one another by transferring bank balances with the aid of overdraft credit. We model this process in an environment of intermediate good exchange with incomplete...

Previous comparative analyses of gross and net settlement have focused on the credit risk of the central counterparty in net settlement arrangements, and on the incentives for participants to alter the risk of the portfolio under net settlement. By modeling the trading economy that generates the...

We study liquidity and systemic risk in high-value payment systems. Flows in high-value systems are characterized by high velocity, meaning that the total amount paid and received is high relative to the stock of reserves. In such systems, banks rely heavily on incoming funds to finance outgoing...

This paper considers the welfare effects of introducing a liquidity-saving mechanism (LSM) in a real-time gross settlement (RTGS) payment system. We study the planner's problem to get a better understanding of the economic role of an LSM and find that an LSM can achieve the planner's allocation...

We construct a price index with weights for the prices of different PCE (personal consumption expenditures) goods chosen to minimize the welfare costs of nominal distortions. In this cost-of-nominal-distortions index (CONDI), the weights are computed in a multi-sector New Keynesian model with...