Cryptocurrency,Security, and Financial Intermediation

In recent years, the use of cryptocurrencies has increased. As these currencies continue to play a larger role, they eventually will be an important component of banking system activity. Moreover, in addition to the standard role of financial intermediaries to facilitate lending, intermediaries can be valuable firms that help provide safekeeping of tokens. The objective of this paper is to demonstrate these important functions in a microfounded model of monetary exchange. Furthermore, we also consider the possibility that central banks issue their own digital currencies that may affect the level of intermediation in the private banking system.     

The Suppression Hypothesis Reconsidered: Competition Between Blacks and White Immigrants in the Retail Trade in Large Northern Cities, 1910–1930

Past studies have dismissed the claim that retail enterprise among blacks in the urban North during the early 20^th century was suppressed by competition from white immigrant merchants. The present investigation reconsiders the suppression hypothesis, applying the concepts of “niche overlap” and “competitive exclusion” from the literature on ethnic competition. An analysis of Census data on large northern cities offers some support for the hypothesis. The level of retail entrepreneurship of black men was negatively associated with that of white immigrant men in 1910 and 1920, implying that black retail enterprise at these time‐points was discouraged by the presence of white immigrant merchants. These negative associations, though, were only moderately significant in a substantive sense, and there was no evidence that a reduction of white immigrant merchants would have produced substantial gains for blacks in the retail trade, as many black entrepreneurs and activists at the time had claimed.     

Race,Self‐Employment,and Labor Absorption

Past studies have argued that in the large cities of developing societies, unemployment is often alleviated when displaced workers are absorbed into the small‐scale entrepreneurial activities of the informal economy. The present study applies this argument to an analysis of women's self‐employment in the U.S. South during the Great Depression. Census data show that in large southern cities in 1940, the unemployment of black women was meaningfully reduced by the self‐employment of these women in domestic service. These data further suggest that dynamics of race, unemployment, and the self‐employment of women in domestic service can be represented by an inverted‐U‐shaped labor absorption curve. These results make several contributions to research on race, labor‐market disadvantage, and self‐employment in the informal sector.     

Emily Greene Balch,Political Economist

The first female economist to win a Nobel Prize was Emily Greene Balch, who shared the Nobel Peace Prize in 1946 for the same anti‐war activism for which she lost her Wellesley professorship of economics and sociology in 1918. Balch, an outspoken pacifist, social reformer, and defender of ethnically‐diverse immigration, has largely been forgotten in the history of economic thought and of sociology. Her contributions and her remarkable career warrant attention.     

Downward Nominal Wage Rigidity Meets the Zero Lower Bound

We add downward nominal wage rigidity to a standard New Keynesian model where the zero lower bound on nominal interest rates is allowed to bind. Wage rigidity reduces the frequency of zero bound episodes but also mitigates the severity of corresponding recessions. As a result, previous studies abstracting from the presence of wage rigidity may have overemphasized the need for increasing the inflation target to offset the costs associated with hitting the zero bound. Moreover, our findings add to the recent debate on the presumed benefits of wage flexibility that has arisen in the aftermath of the Great Recession.     

Inflation and Welfare in a Competitive Search Equilibrium with Asymmetric Information

We study an economy characterized by competitive search and asymmetric information. Money is essential. Buyers decide their cash holdings after observing the contracts posted by firms and experience match-specific preference shocks which remain unknown to sellers. Firms are allowed to post general contracts. In the baseline model with indivisible goods, we show that, when the number of potential buyers is fixed, inflation decreases markups. This, in turn, increases aggregate output and ex ante welfare. When goods are divisible the negative effect of inflation on markups holds for unconstrained agents but is ambiguous for constrained agents. Still, optimal monetary policy implies a positive nominal rate. When there is buyers' free entry, asymmetric information causes a congestion effect that can be corrected by monetary policy.     

How Does Monetary Policy Affect Welfare? Some New Estimates Using Data on Life Evaluation and Emotional Well-Being

Models on the optimal design of monetary policy typically rely on a welfare loss function defined over unemployment and inflation. We estimate such a function using two different dimensions of well-being. The first evaluates how close one is to “the best possible life” on a ladder scale. The second captures the emotional quality of everyday experiences. Our Gallup World Poll sample covers 1.5 million people in 141 nations from 2005 to 2019. Unemployment and inflation reduce well-being across all measures. The ratio of the unemployment-to-inflation effect is 6.2 for the “Ladder-of-Life.” It is lower for positive day-to-day experiences and higher for negative ones.     

Model Comparison with Transaction Costs

Failing to account for transaction costs materially impacts inferences drawn when evaluating asset pricing models, biasing tests in favor of those employing high-cost factors. Ignoring transaction costs, Hou, Xue, and Zhang (2015, Review of Financial Studies, 28, 650–705) q-factor model and Barillas and Shanken (2018, The Journal of Finance, 73, 715–754) six-factor models have high maximum squared Sharpe ratios and small alphas across 205 anomalies. They do not, however, come close to spanning the achievable mean-variance efficient frontier. Accounting for transaction costs, the Fama and French (2015, Journal of Financial Economics, 116, 1–22; 2018, Journal of Financial Economics, 128, 234–252) five-factor model has a significantly higher squared Sharpe ratio than either of these alternative models, while variations employing cash profitability perform better still.