Takaaki Sagawa

The U.S. government borrows more cheaply than other issuers of comparable risk, supported in part by regulations that direct bank portfolios toward public safe assets. These regulations can lower the government's funding cost, but they may also crowd out lending to the private sector. This paper estimates the macroeconomic effects of this regulatory safe asset demand. I construct a narrative series of plausibly exogenous changes in regulatory safe asset demand using announcements by regulatory agencies and quarterly bank-level data. Using this series as an instrument, I identify a regulatory safe asset demand shock. Regulations that increase safe asset demand raise banks' safe asset holdings persistently, increase the government funding advantage on impact, and tighten financial conditions temporarily before easing them in the long run. Output falls as banks shift away from lending to the private sector. A model with a regulatory portfolio constraint and funding costs that decrease in portfolio safety accounts for these responses. Counterfactuals imply that reforms permanently increasing banks' safe asset demand raise the funding advantage only temporarily. Varying the regulatory incentive to hold safe assets generates a Laffer curve in the government's interest savings, with current regulation near the peak of the curve.

This paper estimates the macroeconomic effects of changes in sovereign risk. I identify a novel series of shocks using high-frequency movements in asset prices around International Monetary Fund announcements, which I characterize as sovereign liquidity shocks. Using this series, I estimate the dynamic causal effects of changes in sovereign risk on macroeconomic variables. A sovereign liquidity shock associated with a 100-basis-point increase in sovereign spreads decreases output by 0.96 percent in the months following the shock, with the contraction primarily driven by declines in investment, as well as disruptions in international corporate lending and trade.

This paper studies how global financial integration affects aggregate productivity through risk-sharing and the allocation of capital. We document three stylized facts from emerging-market equity liberalizations in the 1980s and 1990s. First, liberalization episodes attracted net foreign equity inflows of 3 percent of GDP on average within five years. Second, dollar equity prices rose 67 percent relative to not-yet-liberalized markets within two years. Third, larger equity price increases were associated with slower TFP growth over the following decade. We rationalize these facts in a small open economy model in which heterogeneous capitalists choose between producing and investing, and equity prices determine who produces in equilibrium. Opening financial markets to foreign investors shifts part of the country's aggregate risk abroad, so domestic investors require a lower risk premium and the hurdle rate for production falls. Capitalists who previously invested choose to produce, raising capital and output, but aggregate TFP falls because these entrants are less productive than incumbents. A rise in domestic financing capacity can offset the TFP loss from liberalization by allowing productive firms to expand and displace marginal producers. Calibrated to the liberalization episodes, the model implies that liberalization alone raises output only temporarily and lowers aggregate TFP, whereas liberalization accompanied by expansions in domestic financing capacity raises both.

This paper studies the composition of cross-border capital flows by distinguishing between debt and equity assets. We show that equity inflows are positively associated with total factor productivity (TFP) growth, consistent with neoclassical theory, whereas debt inflows are negatively associated with TFP growth. The same divergence appears in the cross-section of net external positions, with fiscal capacity serving as the key country fundamental associated with these patterns. Motivated by this evidence, we develop a multi-country model with heterogeneous entrepreneurs, financial constraints, and international portfolio choice to explain the joint determination of TFP and the composition of global capital flows. Differences in fiscal capacity alter both the supply of government bonds and the risk-adjusted return on domestic risky assets, producing the opposing flows of debt and equity observed in the data.

We develop novel measures of stablecoin shocks and use them to identify the causal effects of stablecoin adoption on U.S. financial markets. Combining a daily narrative dataset of stablecoin-specific news with changes in the combined market capitalization of USDC and USDT, we measure high-frequency movements in stablecoin market capitalization and implement heteroskedasticity-based identification within an event-study and SVAR-IV framework. Stablecoin demand shocks have triggered persistent declines in short-term Treasury yields, a depreciation of the U.S. dollar, and gradual spillovers into crypto and equity markets. We also document heterogeneous effects across firms: payment providers benefit from greater stablecoin adoption, whereas banks—including community and small banks—show no evidence of priced disintermediation risk. Our findings highlight stablecoin demand as a novel channel of asset-market transmission.