Economics

Drawing on 100 million transactions, we show how speculators, hedgers, and market makers interact in the world’s largest FX derivatives market, and that derivatives trading can affect exchange rates. Firms in the largest client sectors—pension and investment funds, insurers, and nonfinancials—use FX derivatives primarily to hedge currency risk, with dealer banks providing the liquidity. Hedge funds, with comparatively smaller net exposures, trade speculatively, whereas dealer banks insulate themselves from changes in speculative demand by taking offsetting positions with hedgers, especially nonfinancials. Non-bank market makers, instead, take residual exchange-rate exposures “on the ..

We provide the first descriptive analysis of the economic value of Community College Baccalaureate (CCB) degrees by examining graduates’ early-career earnings, the costs of completing these programs, and the alignment between field of study and subsequent employment. Using administrative data and controlling for institution and field, we find that CCB graduates earn $4,000 to $9,000 more annually than Associate’s (AA) degree holders one year after graduation but experience average earnings penalties of roughly $2,000 relative to traditional Bachelor’s (BA) recipients. These averages mask substantial heterogeneity: penalties are largest in Computer and Information Technology and Enginee..

U.S. laws make it illegal for employers to knowingly hire undocumented migrants. This legal constraint affects which firms will employ unauthorized workers and what jobs undocumented migrants can expect to get. As a result, unauthorized migrants are more likely to end up in jobs that have a lower risk of detection of immigration status and are less desirable. The Deferred Action for Childhood Arrivals (DACA) policy, which began in August 2012, gave temporary legal authorization to work in the U.S. to a subset of undocumented migrants – those who arrived in the U.S. as children meeting certain other eligibility criteria. In this paper, we use a difference-in-differences strategy to estimate..

Financial Technology (“FinTech”) firms invest significantly more in customer capital relative to traditional financial firms, and such investment builds valuable customer capital. Higher investment by FinTech firms is not accounted for by sectoral focus or differences in firm age. Reasons for higher customer capital investment are explored, including the need to build trust with customers, the focus on downstream segments of the financial marketplace, the operation of platform-based business models, and a heavier reliance on valuable customer data.

This paper studies the critical but underexplored role of subcontracting in shaping the spatial and firm-level effects of federal government spending. Using newly available data on defense subcontract awards linked to establishment-level data from NETS, we examine prime–subcontractor relationships across regions, industries, and over time. We document three key facts. First, subcontracting reallocates a substantial share of federal dollars across geographic areas, weakening the link between the location of prime contracts and where spending ultimately occurs. Second, subcontracting shifts spending across industries, notably from service-sector primes to manufacturing subcontractors. Third,..

This short note computes Trade Restrictiveness Index measures for current U.S. trade policy. Building on the ideas of Anderson and Neary (1996, 2005), the Trade Restrictiveness Index is the uniform tariff that leaves the U.S. consumer as well off as under actual policy. As of October 2025, U.S. trade policy is twice as restrictive as headline tariff numbers suggest. The Trade Restrictiveness Index is 23 percent, which stands in contrast to the 11 percent average tariff rate. Trade policy towards Canada and Mexico is two to three times more restrictive than average tariff rates suggest. Sectoral analysis shows that the restrictiveness is concentrated in vehicles, machinery, and electrical equ..

We propose a framework for studying financial and macroeconomic dynamics in an environment where liquid assets have a productive use but their supply is limited (i.e., the economy is starved for liquidity). The private demand for financial assets arises from the need to hold them for production. The private supply of financial assets is limited and unstable because of borrowing constraints and default risk. We discuss open-economy applications that analyze the accumulation of foreign reserves by emerging economies, the increase in public debt issued by advanced economies, the rapid growth of emerging economies, structural changes in financial markets, and financial globalization. A key resul..

We study how the increased cross-country ownership of financial assets between advanced and emerging economies impacted their financial and macroeconomic volatility. While cross-country ownership improved risk-sharing and reduced volatility associated with financial crises, it also increased the exposure of countries to foreign crises, leading to higher international co-movement. Through quantitative applications of a two-region model representative of advanced and emerging economies, we find that financial globalization reduced volatility worldwide, but significantly more in emerging economies.

Efforts to move care out of hospitals and into the community face a hard constraint: while most medications can be delivered anywhere, diagnosis is still mostly trapped inside the formal health system—clinics, hospitals, and the people and machines inside them. This is especially binding in low- and middle-income countries due to distance, cost, and limited health system capacity. Low-cost data collection devices (e.g., handheld electrocardiograms (ECGs), retinal cameras) are promising, but do not solve the bottleneck: their outputs still require expert interpretation. Artificial intelligence (AI) could turn these raw signals into actionable outputs at scale, but most medical AI is trained..

This paper presents new survey evidence on how household spending changes in response to fiscal transfers. Our key finding is that the planned propensity to spend out of transfers equals the marginal propensity to consume (MPC). This result implies that households do not incorporate future tax liabilities into their spending plans. The canonical HANK model cannot account for our survey results because people in that model are overly sensitive to future tax liabilities. We develop an extended HANK model in which households are partially inattentive to future tax liabilities and to the general-equilibrium consequences of fiscal policy. This inattention dampens forward-looking intertemporal MPC..

In today’s developing world, many economies appear to bypass industrialization and transition directly from agriculture to services. The largest rise in service employment has occurred in non-tradable consumer services, such as retail and hospitality, especially in urban areas, where many cities resemble consumer hubs built around local demand. These patterns of growth raise fundamental questions: Can service-led growth sustain a growth of living standards over time? Is service-led growth inherently biased toward affluent urban consumers? What role should policy play? We propose a parsimonious general equilibrium framework that incorporates non-homothetic preferences and locally non-tradab..