Explaining the Interplay Between Merchant Acceptance and Consumer Adoption in Two-Sided Markets for Payment Methods Staff Working Paper 2019-32 Kim Huynh, Gradon Nicholls, Oleksandr Shcherbakov Recent consumer and merchant surveys show a decrease in the use of cash at the point of sale. Increasingly, consumers and merchants have access to a growing array of payment innovations as substitutes for cash. Content Type(s): Staff research, Staff working papers Research Topic(s): Bank notes, Digital currencies and fintech, Econometric and statistical methods, Financial services JEL Code(s): C, C5, C51, L, L1, L13, L15, L8, L81, L9, L96
Financial Frictions, Durable Goods and Monetary Policy Staff Working Paper 2019-31 Ugochi Emenogu, Leo Michelis Financial frictions affect how much consumers spend on durable and non-durable goods. Borrowers can face both loan-to-value (LTV) constraints and payment-to-income (PTI) constraints. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial system regulation and policies, Monetary policy JEL Code(s): E, E4, E44, E5, E52
Resolving Failed Banks: Uncertainty, Multiple Bidding & Auction Design Staff Working Paper 2019-30 Jason Allen, Robert Clark, Brent Hickman, Eric Richert Bank resolution is costly. In the United States, the Federal Deposit Insurance Corporation (FDIC) typically resolves failing banks by auction. Content Type(s): Staff research, Staff working papers Research Topic(s): Econometric and statistical methods, Financial institutions JEL Code(s): C, C5, C57, D, D4, D44, G, G2, G21
Flight from Safety: How a Change to the Deposit Insurance Limit Affects Households’ Portfolio Allocation Staff Working Paper 2019-29 H. Evren Damar, Reint Gropp, Adi Mordel Deposit insurance protects depositors from failing banks, thus making insured deposits risk-free. When a deposit insurance limit is increased, some deposits that previously were uninsured become insured, thereby increasing the share of risk-free assets in households’ portfolios. This increase cannot simply be undone by households, because to invest in uninsured deposits, a household must first invest in insured deposits up to the limit. This basic insight is the starting point of the analysis in this paper. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial institutions, Financial system regulation and policies JEL Code(s): D, D1, D14, G, G2, G21, G28, L, L5, L51
Tail Index Estimation: Quantile-Driven Threshold Selection Staff Working Paper 2019-28 Jon Danielsson, Lerby Ergun, Casper G. de Vries, Laurens de Haan The most extreme events, such as economic crises, are rare but often have a great impact. It is difficult to precisely determine the likelihood of such events because the sample is small. Content Type(s): Staff research, Staff working papers Research Topic(s): Econometric and statistical methods, Financial stability JEL Code(s): C, C0, C01, C1, C14, C5, C58
Are Long-Horizon Expectations (De-)Stabilizing? Theory and Experiments Staff Working Paper 2019-27 George Evans, Cars Hommes, Isabelle Salle, Bruce McGough Most models in finance assume that agents make trading plans over the infinite future. We consider instead that they are boundedly rational and may only form forecasts over a limited horizon. Content Type(s): Staff research, Staff working papers Research Topic(s): Asset pricing, Central bank research, Economic models, Financial markets JEL Code(s): C, C9, C92, D, D8, D84, E
An Application of Shapley Value Cost Allocation to Liquidity Savings Mechanisms Staff Working Paper 2019-26 Rodney J. Garratt Liquidity demands in real-time gross settlement payment systems can be enormous. To reduce the liquidity requirement, central banks around the world have implemented liquidity savings mechanisms (LSMs). Content Type(s): Staff research, Staff working papers Research Topic(s): Payment clearing and settlement systems JEL Code(s): C, C7, C72, E, E5, E58
Lending Standards, Productivity and Credit Crunches Staff Working Paper 2019-25 Jonathan Swarbrick We propose a macroeconomic model in which adverse selection in investment drives the amplification of macroeconomic fluctuations, in line with prominent roles played by the credit crunch and collapse of the asset-backed security market in the financial crisis. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Credit and credit aggregates, Financial markets, Financial stability, Interest rates, Productivity JEL Code(s): E, E2, E22, E3, E32, E4, E44, G, G0, G01
Privacy as a Public Good: A Case for Electronic Cash Staff Working Paper 2019-24 Rodney J. Garratt, Maarten van Oordt Cash gives users a high level of privacy when making payments, but the use of cash to make payments is declining. People increasingly use debit cards, credit cards or other methods to pay. Content Type(s): Staff research, Staff working papers Research Topic(s): Bank notes, Central bank research, Digital currencies and fintech, Payment clearing and settlement systems JEL Code(s): E, E4, E42, G, G2, G28
Systemic Risk and Collateral Adequacy Staff Working Paper 2019-23 Radoslav Raykov Many derivatives markets use collateral requirements calculated with industry-standard but dated methods that are not designed with systemic risk in mind. This paper explores whether the conservative nature of conventional collateral requirements outweighs their lack of consideration of systemic risk. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial institutions, Financial markets JEL Code(s): G, G1, G10, G2, G20