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2026
A Framework for Understanding the Vulnerabilities of New Money-Like Products
Abstract:
New money-like products, such as tokenized money market funds (MMFs), money market exchange-traded funds (MMETFs), and stablecoins, could be transformative for finance. These products may offer significant benefits, but like other money-like assets, they also have certain vulnerabilities. We introduce a framework to analyze the vulnerabilities of new products by comparing their features to those that contribute to vulnerabilities in MMFs. Specifically, we examine the extent to which each product engages in liquidity transformation, is subject to threshold effects, serves as a money-like asset, poses contagion risks, and has reactive investors. Our framework is useful for assessing the potential effects of novel cash-like products on the overall resilience of the financial system and how such an assessment may change as these products’ uses evolve.
Keywords: money market funds (MMFs), stablecoins, tokenized money market funds, money market exchange-traded funds (MMETFs), financial stability, liquidity transformation, private money-like assets, moneyness, contagion, reactive investors, thresholds
DOI: https://doi.org/10.17016/FEDS.2026.002
A New Reason to Hate Grocery Inflation: Measuring and Interpreting Inflation Heterogeneity
Abstract:
The 2021-2022 inflation episode presented the first opportunity to examine inflation and price dispersion using U.S. scanner data in a high-inflation environment. Data from 50,000 outlets reveals that price changes across similar goods grew more dispersed in 2022 before falling again in 2023. This paper documents how price change dispersion interacts with households' product choices to generate substantial inflation heterogeneity. Household-level inflation rates exhibit a 1.4 percentage point interquartile range in 2019, which grew to 4.0 percentage points in 2022 before falling back to 1.6 percentage points in 2023. Households offset little of their implied budget shocks through substitution. A model with idiosyncratic preferences rationalizes household behavior and implies that households' inflation rates represent convenient, observable bounds on their welfare losses. When inflation peaked in 2022, households at the 10th and 90th percentiles of the inflation distribution and average grocery expenditures faced welfare losses of $573 and $1,145, respectively.
DOI: https://doi.org/10.17016/FEDS.2026.001
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