With the euro's appearance in the world market, the competition between euro and dollar has become a hot-button issue. The author focuses on the movements of the euro/dollar exchange rate and probes into the determinants of its exchange rate. Their competition regarding invoicing and reserves...

We develop a model of financial crises with both a financial amplification mechanism, via frictional intermediation, and a role for sentiment, via time-varying beliefs about an illiquidity state. We confront the model with data on credit spreads, equity prices, credit, and output across the...

This is the Appendix of the paper "Public Liquidity and Financial Crises", "https://ssrn.com/abstract=3175101" https://ssrn.com/abstract=3175101.In this appendix, I show the numerical methods for solving the general equilibrium model that features infrequent financial crises and the private...

We demonstrate the passthrough of Treasury supply to deposit funding through bank market power. We show that an increase in Treasury supply leads to a net deposit outflow. At the same time, reliance on wholesale funding decreases. The effect is heterogeneous in nature - banks in more competitive...

Is the supply of public liquidity important for alleviating financial crises? I quantify a general equilibrium model featuring the liquidity insurance channel: Banks demand public liquidity as insurance against liquidation losses during banking crises. Cheaper liquidity insurance increases...

Investors can execute trades through either brokers that trade on their behalf (agency intermediation) or dealers that trade with them (principal intermediation). We explain the heterogeneity in intermediation via the trade-off between monitoring brokers and incurring dealer inventory costs....

We build a theory of short-term risk premia dynamics based on funding costs. The theory builds on a framework of intermediary asset pricing in a market microstructure setting. Financial intermediaries facilitate trading by market making. To fund these trading activities, intermediaries earn a...

Bank-created money, shadow-bank money, and Treasury bonds all satisfy investor's demand for a liquid transaction medium and safe store of value. We measure the quantity of these three forms of liquidity and their corresponding liquidity premium over a sample from 1926 to 2016. We empirically...

This paper quantifies the substitution between money (bank deposits) and Treasuries. The estimation is significantly different from either zero or perfect substitution. Thus, fixing monetary policy, Treasury supply still affects the liquidity premium. Furthermore, the substitution increases over...