Policy Instruments and Financial System

Capability-Based Financial Instruments

Every novel cooperative arrangement of mutually suspicious parties interacting electronically — every smart contract — effectively requires a new cryptographic protocol. However, if every new contract requires new cryptographic protocol design, our dreams of cryptographically enabled electronic commerce would be unreachable. Cryptographic protocol design is too hard and expensive, given our unl...

Monetary Policy, Fiscal Policy, and the Efficiency of Our Financial System: Lessons from the Financial Crisis

I am enormously grateful to Rich Clarida and Jeff Fuhrer for their kind and thoughtful initiative, first in conceiving the idea for this conference and then in organizing it so successfully; to Eric Rosengren and the Federal Reserve Bank of Boston for the marvelous hospitality we have all enjoyed these past two days; to the many fine economists who devoted their valuable time to writing papers ...

Monetary policy transmission channels and policy instruments ∗

The Federal Reserve has implemented policies during the past six years that rely on channels of transmission to the real economy that economic models have assumed to exist but seldom tested or on channels that were simply presumed not to exist. I discuss the board channels of monetary policy transmission that may allow forward guidance and balance sheet policies to affect the economy. The assum...

Incomplete Financial Markets , Irreversibility of Investments , and Fiscal and Monetary Policy Instruments

In this paper, we analyze the use of fiscal and monetary instruments to improve long-run welfare when productive investment is irreversible and uncollateralizable and there is no insurance. Only fiat money or government-issued bonds provide self-insurance. We demonstrate that an increase in precautionary savings reduces irreversible productive investment. Hence, subsidies to promote productive ...

Financial Instruments in Recommendation Mechanisms