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Challenges for the Swiss Innovation System
(2024)KOF StudiesThe Swiss Innovation System is the most powerful instrument to achieve continuous improvements in material well-being for citizens in Switzerland, and for addressing challenges such as protection against cyberattacks or providing clean energy. Yet, the Swiss Innovation System and its successes are challenged in multiple ways today. The Swiss lead in innovation has declined and the share of firms performing R&D has decreased. Other major ...Report -
Enough Liquidity with Enough Capital-and Vice Versa?
(2023)CFS Working Paper SeriesWe study the interplay of capital and liquidity regulation in a general equilibrium setting by focusing on future funding risks. The model consists of a banking sector with long-term illiquid investment opportunities that need to be financed by short-term debt and by issuing equity. Reliance on refinancing long-term investment in the middle of the life-time is risky, since the next generation of potential short-term debt holders may not ...Working Paper -
Crowdsearch
(2023)CEPR Discussion PapersA common phenomenon is crowdsearch, i.e. when a group of agents is invited to search for a valuable physical or virtual object, e.g. creating and patenting on an invention, solving an open scientific problem, searching for a vulnerability in softwares, or mining for a nonce in proof-of-work blockchains. We study a binary model of crowdsearch in which agents have different abilities to find the object. We characterize the types of equilibria ...Working Paper -
The Monetary Policy Haircut Rule
(2023)CEPR Discussion PapersWe embed a banking model, depicting the duality of private money creation and credit extension, into a two-sector neoclassical model with financial frictions. Banks rely on central-bank reserve loans that are collateralized according to the central bank's collateral framework. We derive optimal static and dynamic haircut rules, which balance the efficient allocation of capital across sectors and bank-default costs. We offer a simple formula ...Working Paper -
Contagious Stablecoins?
(2023)CEPR Discussion PapersWe study competition between stablecoins pegged to a stable currency. Stablecoins are issued by coalescing investors and backed by long-term assets. They can either be redeemed with the issuer or traded in a secondary market. When an issuer limits redemption and sticks to an investment rule, its stablecoin is stable in an idiosyncratic sense—it is invulnerable to runs and always trades at the pegged price. Competition between issuers, ...Working Paper -
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Why Bank Money Creation?
(2022)CEPR Discussion PapersWe provide a rationale for bank money creation in our monetary system by examining its merits over a system with banks as intermediaries of loanable funds. The latter system could result when CBDCs are introduced. In the loanable funds system, households limit banks’ leverage when providing deposits such that banks have enough “skin in the game” and monitor loans. When there is unobservable heterogeneity among banks with regard to ...Working Paper -
New Forms of Democracy
(2022)CESifo Working PapersIn the third decade of the 21st century, digitization, global events, challenges from authoritarian states, and difficulties of particular democracies to function properly confront democracy with a new series of challenges and opportunities that will force it to reinvent itself. The last decades have produced an accelerating flow of ideas for new forms of democracy. We survey a long period in the quest for such new forms and point to next ...Working Paper -
Staking Pools on Blockchains
(2022)CEPR Discussion PapersOn several proof-of-stake blockchains, agents engaged in validating transactions can open a pool to which others can delegate their stake in order to earn higher returns. We develop a model of staking pool formation in the presence of malicious agents and establish existence and uniqueness of equilibria. We then identify potential and risk of staking pools. First, allowing for staking pools lowers blockchain security. Yet, honest stake ...Working Paper -
Artificial Intelligence as Self-learning Capital
(2022)CEPR Discussion PapersWe model Artificial Intelligence (AI) as self-learning capital: Its productivity rises by its use and by training with data. In a three-sector model, an AI sector and an applied research (AR) sector produce intermediates for a final good firm and compete for high-skilled workers. AR development benefits from inter-temporal spillovers and knowledge spillovers of agents working in AI, and AI benefits from application gains through its use ...Working Paper