We propose a model of asset encumbrance by banks subject to rollover risk and study the consequences for fragility, funding costs, and prudential regulation. A bank's choice of encumbrance trades off the benefit of expanding profitable investment funded by cheap long-term secured debt against...

This paper provides a structured overview of the burgeoning literature on the economics of CBDC. We document the economic forces that shape the rise of digital money and review motives for the issuance of CBDC. We then study the implications for the financial system and discuss of a number of...

We study a model of financial intermediation, payment choice, and privacy in the digital economy. Cash preserves anonymity but cannot be used for more efficient online transactions. By contrast, bank deposits can be used online but do not preserve anonymity. Banks use the information contained...

How likely is financial contagion when banks anticipate an aggregate liquidity shock and what are the consequences for bank choices, welfare, and regulation? We study an economy with two regional banks that insure risk-averse consumers against their idiosyncratic liquidity shocks and hold...

Financial services are delivered almost exclusively online and cyber attackers have taken notice. We develop a principal-agent model with fee-paying clients who delegate security decisions to financial platforms that are subject to cyber attacks that steal data or assets. We derive testable...

We study the borrowing of a bank subject to rollover risk and derive implications for monetary policy transmission and financial stability. The optimal borrowing balances the benefit of additional profitable investments with the cost of higher bank fragility. This trade-off leads to a funding...

This paper analyzes the importance of information technology (IT) in banking for entrepreneurship. To guide our empirical analysis, we build a parsimonious model of bank screening and lending that predicts that IT in banking can spur entrepreneurship by making it easier for startups to borrow...