This paper investigates price discovery in foreign exchange (FX) swaps. Using data on inter-dealer transactions, we find that a 1 standard deviation increase in order flow (i.e. net pressure to obtain USD through FX swaps) increases the cost of dollar funding by up to 4 basis points after the...

Using transaction level data from the inter-dealer market, we find that the price impact of one standard deviation change in FX swap order flow has increased from less than one basis point prior to 2008 to about five basis points after 2008. However, the increase in price impact is confined to...

This paper investigates the validity of Covered Interest Rate Parity (CIP) in longdated fixed income securities. I show that common measures of CIP rely on trading strategies subject to rollover risk and credit risk, or fail to fully account for the trading costs. Hence, roundtrip CIP profit is...

In this paper, we study the mechanisms that govern price stability of MakerDAO's DAI token, the first decentralized stablecoin. DAI works through a set of autonomous smart contracts, in which users deposit cryptocurrency collateral, typically Ethereum, and borrow a fraction of their positions as...

El Salvador's 2021 monetary experiment to make Bitcoin legal tender increases financial inclusion at the cost of a volatile medium of exchange. In this paper we study the macroeconomic effects of introducing cryptocurrencies in a workhorse small open economy model. We study a potential solution...

We take this question to be isomorphic to, "What Keeps Fixed Exchange Rates Fixed?" and address it with analysis familiar in exchange rate economics. Using a rich dataset of trades between the stablecoin Treasury and private investors, we examine how peg-sustaining arbitrage stabilizes the price...