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With market capitalization exceeding USD250 billion by mid-2025, stablecoins have evolved from a crypto-focused innovation into a vital component of the global monetary structure. This paper identifies the characteristics of stablecoins from an analytical perspective and investigates the role of stablecoins in forming a hybrid monetary ecosystem where public (fiat, CBDC) and private (USDC, USDT, DAI) monies coexist. …
This paper analyses the effects of US monetary policy on stock markets.We find that, on average, a tightening of 50 basis points reduces returns by about 3%.Moreover, returns react more strongly when no change had been expected, when there is a directional change in the monetary policy stance and during periods of high market uncertainty.We show that individual stocks react in a highly heterogeneous fashion and relat…
Proper conduct of monetary policy requires understanding the monetary transmission mechanism, to monitor the economy, make decisions on the stance of policy, and explain the policy actions to the public. Hence, gathering evidence on the monetary transmission mechanism in the euro area has been a priority for the Eurosystem. This 2003 book presents the results of a multi-year collaborative project conducted by the Eur…
The ‘credit channel’ theory of monetary policy transmission holds that informational frictions in credit markets worsen during tight-money periods. The resulting increase in the external finance premium--the difference in cost between internal and external funds--enhances the effects of monetary policy on the real economy. The authors document the responses of GDP and its components to monetary policy shocks and desc…
This study investigates the influence of monetary policy and monetary policy uncertainties on Bitcoin returns, utilizing monthly data of BTC, and MPU from July 2010 to August 2023, and employing the Markov Switching Means VAR (MSM-VAR) method. The findings reveal that Bitcoin returns can be categorized into two distinct regimes: 1) regime 1 with low volatility, and 2) regime 2 with high volatility. In both regimes, a…
This paper studies the effects of unexpected changes in US monetary policy on digital asset returns. We use event study regressions and find that monetary policy surprises negatively affect BTC and ETH, the two largest digital assets, but do not significantly affect the rest of the market. Second, we use high-frequency price data to examine the effect of the FOMC statements release and Minutes release on the prices o…
We study existence and uniqueness of continuous-time stochastic Radner equilibria in an incomplete market model among a group of agents whose preference is characterized by cash invariant time-consistent monetary utilities. An assumption of "smallness" type is shown to be sufficient for existence and uniqueness. In particular, this assumption encapsulates settings with small endowments, small time-horizon, or a large…
We describe the innovations in finances, introduced over the recent decades, and analyze most of the business and regulatory challenges, faced by the financial industry, because of the present disruptive changes in the global capital markets. We use the integrative thinking approach to formulate the new central bank strategy and propose that the new strategy has to be focused on the constant management of the monetar…
Stablecoins have emerged as a significant component of global financial infrastructure, with aggregate market capitalization surpassing USD250 billion in 2025. Their increasing integration into payment and settlement systems has simultaneously introduced novel channels of systemic exposure, particularly liquidity risk during periods of market stress. This study develops a hybrid monetary architecture that embeds fiat…
We study the monetary-transmission mechanism with a data set that includes quarterly observations of every insured U.S. commercial bank from 1976 to 1993. We find that the impact of monetary policy on lending is stronger for banks with less liquid balance sheets—i.e., banks with lower ratios of securities to assets. Moreover, this pattern is largely attributable to the smaller banks, those in the bottom 95 percent of…
We study how a central bank should dynamically set short-term nominal interest rates to stabilize inflation and unemployment when macroeconomic relationships are uncertain and time-varying. We model monetary policy as a sequential decision-making problem where the central bank observes macroeconomic conditions quarterly and chooses interest rate adjustments. Using publicly accessible historical Federal Reserve Econom…
Bitcoin operates as a macroeconomic paradox: it combines a strictly predetermined, inelastic monetary issuance schedule with a stochastic, highly elastic demand for scarce block space. This paper empirically validates the Endogenous Constraint Hypothesis, positing that protocol-level throughput limits generate a non-linear negative feedback loop between network friction and base-layer monetary velocity. Using a verif…
Accurately forecasting central bank policy decisions, particularly those of the Federal Open Market Committee(FOMC) has become increasingly important amid heightened economic uncertainty. While prior studies have used monetary policy texts to predict rate changes, most rely on static classification models that overlook the deliberative nature of policymaking. This study proposes a novel framework that structurally im…
A currency with stable purchasing power can always provide a psychological haven for people around the world. However, since the collapse of the Bretton Woods system, issuing more cheap currencies has become a common trend in the international community, and the legalization and over issuance of stablecoins will strengthen this trend. In this context, our study focused on a parallel monetary system based on a redeema…
The global financial crisis (GFC) triggered the use of macroprudential policies imposed on the banking sector. Using bank-level panel data for Israel for the period 2004-2019, we find that domestic macroprudential measures changed the composition of bank credit growth but did not affect the total credit growth rate. Specifically, we show that macroprudential measures targeted at the housing sector moderated housing c…
Forecasting central bank policy decisions remains a persistent challenge for investors, financial institutions, and policymakers due to the wide-reaching impact of monetary actions. In particular, anticipating shifts in the U.S. federal funds rate is vital for risk management and trading strategies. Traditional methods relying only on structured macroeconomic indicators often fall short in capturing the forward-looki…
We present a theory of expected utility with state-dependent linear utility functions for monetary returns, that incorporates the possibility of loss-aversion. Our results relate to first order stochastic dominance, mean-preserving spread, increasing-concave linear utility profiles and risk aversion. As an application of the expected utility theory developed here, we analyze the contract that a monopolist would offer…
This research examines whether sentiments conveyed in the State Bank of Pakistan's (SBP) communications impact financial market expectations and can act as a monetary policy tool. To achieve our goal, we first use sentiment analysis techniques to quantify the tone of SBP monetary policy documents and second, we use short time window, high frequency methodology to approximate the impact of tone on stock market returns…
Gold, silver, copper, and sometimes aluminum, zinc, nickel — a mix of monetary metals and industrial cycle metals.
The impossible trinity (trilemma) says a country cannot simultaneously have a fixed exchange rate, free capital mobility, and an independent monetary policy — it must drop one.
Money supply is the measured stock of money — M0/MB, M1, M2 — a quantity that depends on what you count as money.
The Taylor rule is a simple policy reaction: set the policy rate to a neutral real rate plus inflation, then add weights on the inflation gap and the output gap.
Inflation is a sustained rise in the general price level — a decline in purchasing power, not a one-off relative-price shock.
Monetary Dominance Regime — Regime where the central bank anchors inflation over fiscal needs.
The February–March 2020 COVID crash was a dash-for-cash that hit even Treasuries, ended by an unprecedented joint monetary-fiscal backstop — a health shock that became a market-function crisis.
John Law’s Mississippi Company and Banque Royale fused monetary expansion, colonial equity, and French public finance until 1720 — a state-run bubble that ended in a paper-money collapse.
Macroprudential Policy — Countercyclical tools that alter credit creation before traditional monetary policy reacts.
Monetary policy is the central bank’s control of short rates, liquidity, and sometimes the balance sheet — the price of reserves and the path of the front end.
The February–March 2020 COVID crash was a dash-for-cash that hit even Treasuries, ended by an unprecedented joint monetary-fiscal backstop — a health shock that became a market-function crisis.
The impossible trinity (trilemma) says a country cannot simultaneously have a fixed exchange rate, free capital mobility, and an independent monetary policy — it must drop one.
Macroprudential Policy — Countercyclical tools that alter credit creation before traditional monetary policy reacts.
Gold, silver, copper, and sometimes aluminum, zinc, nickel — a mix of monetary metals and industrial cycle metals.
John Law’s Mississippi Company and Banque Royale fused monetary expansion, colonial equity, and French public finance until 1720 — a state-run bubble that ended in a paper-money collapse.
Monetary Dominance Regime — Regime where the central bank anchors inflation over fiscal needs.
Monetary policy is the central bank’s control of short rates, liquidity, and sometimes the balance sheet — the price of reserves and the path of the front end.