This paper proposes a method for assessing international spillovers from nominal demand shocks. It quantifies the impact of a shock in one country on all other countries. The paper concludes that the network effects in shock spillovers can be substantial, comparable, and often exceed the initial...

It takes many years for more efficient electronic payments to be widely used, and the fees that merchants (consumers) pay for using those services are increasing (decreasing) over time. We address these puzzles by studying payments system evolution with a dynamic model in a twosided market...

We study the optimal design of a central bank digital currency (CBDC) in an environment where agents sort into cash, CBDC and bank deposits according to their preferences over anonymity and security; and where network effects make the convenience of payment instruments dependent on the number of...

This paper reviews tools used to identify and measure interconnectedness and raises the awareness of policymakers as to potential cross-sectional implications of prudential tools aimed at controlling interconnectedness. The paper examines two sets of tools—developed at the IMF and...

This paper tests the effect of comparative advantage, size, and networking on the firm probability of exporting. The closest theoretical framework is the one of Bernard, Redding, and Schott (2007), with firm heterogeneity across countries and industries. We use a recently assembled multi-country...

What determines the currency to which countries peg or ""anchor"" their exchange rate? Data for over 100 countries between 1980 and 1998 reveal that trade network externalities are a key determinant. This implies that anchor currency choice may well be suboptimal in that certain currencies,...

Dollarization in Russia increased rapidly during the early 1990s, but failed to come down in the second half of the 1990s in spite of exchange rate stabilization. To explain this ""dollarization hysteresis,"" this paper develops a model in which network externalities in the demand for currency...