with Fabienne Schneider
It is commonly believed that borrowers cannot be anonymous in unsecured credit relations because anonymity heavily reduces the scope for punishment and therefore makes credit unfeasible except for very special circumstances. However, we demonstrate that credit is generally feasible even if borrowers are anonymous. In particular, we construct equilibria where borrowers use potentially multiple pseudonyms (such as usernames or wallet addresses) to interact with lenders. We assume that the complete history of past actions committed by a pseudonym is public but not the identity behind that pseudonym. While borrowers cannot be directly punished due to their anonymity, there is still scope for punishment. One possibility is based on the loss of reputation accumulated by a pseudonym over time. Another involves charging a fee to create pseudonyms. Although credit and anonymity are not mutually exclusive, we also show that maintaining a borrower’s anonymity is costly.
The proposed revision of the Swiss Banking Act introduces a public liquidity backstop (PLB) for distressed systemically important banks (SIBs), in part to facilitate resolution. We examine the impact of the PLB on fiscal balances, societal welfare, and the incentives of bank shareholders and management. A PLB, like too-big-to-fail (TBTF) status, acts as a subsidy for non-convertible bonds, which can create negative externalities. Corrective measures must be implemented before the PLB is activated to align incentives with societal interests. We conservatively estimate that Swiss SIBs’ TBTF status results in funding cost reductions far greater than the proposed ex-ante compensation, with UBS Group AG alone gaining at least USD 2.9 billion in 2022. The risk for Switzerland of hosting SIBs warrants additional precautionary savings.
I study the relationship between inflation and informational frictions in a standard model where money serves as a medium of exchange, inflation is volatile, and households are imperfectly informed about the inflation rate, while firms are fully informed. I show that when the degree of asymmetric information is fixed, informational frictions amplify the cost of higher expected inflation by increasing firms' market power. I then extend the model by introducing two learning mechanisms that endogenize the degree of asymmetric information: households can either acquire information at a cost before entering the market or learn by observing prices. Notably, higher expected inflation affects both the value of information and the velocity of money. The former endogenously changes households' incentive to learn, while the latter alters how frequently households observe and learn from prices. While higher expected inflation could theoretically reduce information asymmetries, realistic calibration predicts the opposite: inflation increases asymmetric information, consistent with U.S. data. Finally, I examine the implications for the cost of inflation. Compared to standard models, informational frictions significantly increase the costs of both higher expected inflation and inflation volatility.
Should we ban cryptocurrencies such as Bitcoin or Ether? What are some of the potential consequences for the real economy? We provide an example of an equilibrium where an intrinsically useless object is valued, even though it is not currently used as a means of payment, but could be in the future. Although in equilibrium the currency is currently used "only" as a speculative asset, similar to what we observe nowadays, this does not imply that banning the currency is without cost. In particular, we show that the presence of cryptocurrencies can be beneficial by acting as a disciplining device against governments attempting to inflate their currencies in order to generate seigniorage revenue. A calibration exercise applied to U.S. and Bitcoin data suggests that these benefits could be substantial.
Money and credit are ubiquitous payment instruments in modern economies, yet co-essentiality—the feature that the use of money and credit outputferoms arrangments with only either- is hard to generate in microfounded models of money. We address this in a heterogeneous New-Monetarist framework where agents differ in expected lifespans. We show that when lifespans are publicly known, co-essentiality does not arise. However, introducing asymmetric information enables co-essentiality: credit becomes essential for young agents without money balances, while money provides a safeguard against default risks. Achieving such an equilibrium requires monetary policy to generate sufficient but limited inflation—high enough to raise debt limits but not so high as to excessively increase the cost of holding money.
Since Kocherlakota (1998), it has been understood that money functions as a substitute for record-keeping. In a world with perfect record-keeping, money would be unnecessary, as all transactions could be settled through credit. The advent of blockchain technology, however, raises a critical question: is money still necessary in the crypto space? In this paper, I explore this question using a model where agents must settle transactions and have access to a blockchain for recording these transactions. A key feature of many blockchains is that agents are pseudonymous. As demonstrated by Schneider and Taudien (2025), this pseudonymity constrains the set of incentive-feasible contracts. I show that the remaining set of credit contracts cannot replicate all allocations achievable with money. Moreover, money enables allocations that are Pareto-superior.