The gold standard emerged as the international monetary system by the end of the 19th century. We formally study its properties in a micro-founded model and find that the scarcity of the world gold stock not only results in a suboptimal output of goods that are purchased with money but also...

In response to the Global Financial Crisis, central banks engaged in large-scale asset purchases funded by the issuance of reserves. These "unconventional" policies continued during the pandemic, so that by 2022 central banks' balance sheets had grown up to ten-fold. As a result of rapidly...

We consider the debut of a new monetary instrument, central bank digital currencies (CBDCs). Drawing on examples from monetary history, we argue that a successful monetary transformation must combine microeconomic efficiency with macroeconomic credibility. A paradoxical feature of these...

Before the era of large central bank balance sheets, banks relied on incoming payments to fund outgoing payments in order to conserve scarce liquidity. Even in the era of large central bank balance sheets, rather than funding payments with abundant reserve balances, we show that outgoing...

We conduct a systematic analysis of the costs and benefits of large-scale securities purchases, using the Federal Reserve's QE4 program as a concrete example. This program was initiated at the onset of the pandemic in March 2020 and continued for two years, leading to a doubling of the Fed's...

The fiscal theory states that inflation adjusts so that the real value of government debt equals the present value of real primary surpluses. Monetary policy remains important. The central bank can set an interest rate target, which determines the path of expected inflation, while news about the...

We show that decentralized privately created money with unstable values can hinder the traded, more transaction-friction sensitive, sector of the economy. We do so in the context of the NationalBanking Act of 1864 in the United States that created a new federally-regulated, fully-backed currency...

Interest in central bank digital currencies (CBDCs) has been burgeoning with 134 countries now exploring its implementation. In December 2022, India started its CBDC pilot program to continue its transition towards a digitized payments economy. This paper presents the first empirical analysis...

Terra, the third largest cryptocurrency ecosystem after Bitcoin and Ethereum, collapsed in three days in May 2022 and wiped out $50 billion in valuation. At the center of the collapse was a run on a blockchain-based borrowing and lending protocol (Anchor) that promised high yields to its...

This paper studies strategic decision making by a private currency ledger operator, which faces competition from public money and/or other ledgers. A monopoly ledger operator can incentivize contract enforcement across the financial sector by threatening exclusion, but it can also impose markups...