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16-Jun-2025 Financial conditions and the macroeconomy: a two-factor view This paper develops a novel financial conditions index (FCI) for the United States to provide a transparent and interpretable measure of financial conditions and their interaction with the macroeconomy. Financial conditions reflect the cost and availability of financing faced by households and firms. As such, they are central to the transmission of monetary policy. Existing FCIs often lack transparency in their construction and fail to disentangle key dimensions of financial conditions. To address these gaps, we use a dynamic factor model to extract two latent factors that summarise financial conditions, offering a flexible and intuitive framework for understanding their macroeconomic implications. Request summary
3-Jun-2025 Monetary policy and earnings inequality: inflation dependencies The post-pandemic surge in inflation emphasises the importance of studying the distributional consequences of monetary policy within a high-inflation environment. We assess the impact of monetary policy on labour income inequality, while considering the underlying inflation regime. Although recent studies have shown that monetary policy disproportionately affects labour income across the distribution, we investigate how these distributional effects vary depending on different inflation regimes. We then use our findings to assess how this channel influences aggregate dynamics, particularly focusing on the response of aggregate consumption. Request summary
28-May-2025 Stablecoins and safe asset prices Stablecoins are digital assets designed to maintain a stable value relative to a reference asset, such as fiat currencies. The market is dominated by stablecoins that are pegged to the US dollar, with backing assets composed mostly of dollar-denominated short-term instruments such as US Treasury securities. As of March 2025, their combined assets under management exceeded $200 billion, surpassing the short-term US securities holdings of major foreign investors. In 2024, they purchased $40 billion of US Treasury bills, similar to the largest US government money market funds and larger than most foreign purchases. Their rapid growth in recent years raises questions about the impact on the markets they invest in, with potential broader implications for monetary policy and financial stability. Request summary
20-May-2025 Expecting job replacement by GenAI: effects on workers' economic outlook and behavior Our research explores how people's expectations about the impact of generative AI (gen AI) on jobs shape their broader economic outlook and behaviour. To investigate this, we conducted surveys and randomised experiments in the United States and Japan. Participants were randomly given expert estimates showing that gen AI might replace either 14% or 47% of current jobs. We measured their beliefs about job replacement due to AI both before and after they received this information. Additionally, we asked them to forecast economic indicators such as GDP growth and inflation rates, and to report their willingness to learn and use AI in the workplace. Request summary
14-May-2025 Towards verifiability of total value locked (TVL) in decentralized finance Total value locked (TVL) is the main metric used to assess the economic significance of decentralised finance (DeFi) projects. It represents the total value of on-chain cryptoassets deposited in DeFi protocols. Despite its importance, TVL calculations are not standardised and in some instances rely on self-reported off-chain data, opening the door to manipulation. Inconsistent methodologies across different aggregators can lead to large discrepancies in the reported figures. This lack of transparency raises concerns about accuracy when measuring the financial magnitude of DeFi ecosystems. Request summary
13-May-2025 Collateralized lending in private credit Private credit, often associated with uncollateralised lending, has become an important source of corporate financing. With total assets under management now exceeding $1.5 trillion, the private credit market rivals the markets for leveraged loans or high-yield bonds in the United States. Within the private credit universe, direct lending has grown particularly fast. In direct lending, loans are directly negotiated between non-bank lenders and borrowers, and lenders typically hold the loan on their balance sheet until maturity. This paper studies the patterns and determinants of secured and unsecured direct lending in the US private credit market. Request summary
12-May-2025 Exchange rate effects on firm performance: a NICER approach This paper examines how exchange rate movements affect firms' financial health and real decisions such as investment and hiring. We focus on the "valuation effects" of exchange rate changes, which influence the values of exports and imports in local currency. This channel matters when most trade is invoiced in a few dominant currencies, such as the US dollar. In the short term with sticky prices, the valuation effects can outweigh the expenditure-switching effects on trade volumes. Request summary