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Central Bank Digital Currency as a Store of Value and Banks

Central bank digital currencies are increasingly regarded worldwide as viable means of payment. But how do CBDCs affect welfare when used as stores of value? A recent study investigates the ramifications of CBDCs as public money serving as stores of value, customers’ heterogeneous beliefs about bank stability and how it all impacts banks. ....

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The asset bubble that's quietly popping

Federal Reserve Chair Jerome Powell and other Fed policymakers meet this week to raise borrowing costs again in a fight against the highest inflation in four decades that they're not close to winning. ....

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Market report: Rising stock wealth does boost spending, employment


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Image: Christine Daniloff, MIT; stock imagery
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The stock market is a staple of business news, but it is unclear how meaningful stock prices are to the larger economy. Do changes in stock prices directly affect shorter-term consumption, or are they just leading indicators for subsequent economic activity? The U.S. Federal Reserve, for its part, usually seems to act as if stock-based wealth does help drive spending and employment. But is this correct?
A new study co-authored by an MIT economist brings data to the discussion and finds that increased stock market wealth has moderate but clear economic effects. After looking at the U.S. on a county-by-county basis, the study finds that after large market shifts, people spend about 3.2 cents per year out of each increased dollar of stock wealth they possess. There are also distinct employment effects in “nontradable” that is, place-situated i ....

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