Medieval lex mercatoria refers to the customary commercial law developed by merchants to govern cross-border trade, operating alongside and sometimes independently of territorial legal systems. This paper compares that historical form of autonomous ordering with contemporary blockchain governance. Both create institutional frameworks that facilitate exchange among diverse actors and provide mechanisms that function, to varying degrees, outside traditional state authority. The key difference lies in how rules are generated and enforced: medieval merchant law relied on flexible norms interpreted by merchant courts and other human adjudicators, whereas blockchain systems seek to reduce ambiguity by encoding rules ex ante in smart contracts and automating enforcement. Decentralized decision-making and emerging forms of on-chain adjudication further reimagine dispute resolution without centralized judicial power. The central claim is that both represent polycentric legal orders whose significance ultimately depends on how they interact with, complement, or challenge formal governmental institutions.

Este trabajo vincula la evolución del poder de mercado de la banca española con la liberalización financiera entre 1970 y 1990. Se realiza una cronología de las medidas de desregulación y se mide empíricamente el poder de mercado, para lo que se ha elaborado un indicador directo, el índice Lerner. Se comprueba que la desregulación bancaria no fue lineal, y las entidades bancarias compitieron incluso antes de la liberación completa. Se aprecia que el poder de mercado disminuyó en los años 70, por la mayor competencia a través de la red de oficinas, seguido por un aumento en los 80, coincidiendo con un parón en las medidas liberalizadoras. Desde 1988, la competencia se intensificó de nuevo con la consolidación de las medidas liberalizadoras. Además, los resultados permiten descartar la tesis de las reformas financieras consideradas como un pacto entre la banca y las autoridades que no alteró el marco competitivo permitiendo a los grandes bancos cartelizar el sector.

Tokenised assets are expected to transform finance, yet their legal treatment remains a source of uncertainty. This article presents an analytical framework for categorising legal structures of tokenised assets, addressing a gap in academic literature and regulatory approaches. We introduce a taxonomy based on the legal relationship between tokens and their underlying assets. In complete tokenisation tokens embody legally enforceable rights. It comprises direct tokenisation, where tokens are the primary form of the asset, and indirect tokenisation, where asset-backed tokens are created through intermediary structures. In contrast, incomplete tokenisation results in tokens that function as “digital twins” with limited or no legal value.

Our analysis reveals that the effectiveness of tokenisation depends on the robustness of this legal bond. We compare how these categories impact tokenisation features, including asset transferability, legal certainty, and composability. Furthermore, we identify limiting factors in current regulatory frameworks, such as form requirements, ownership models, and identity mechanisms. Drawing examples from various legal systems and asset classes, including financial instruments, property rights, and digital assets, this work provides a foundation for evaluating tokenisation strategies, with practical insights for regulators and market participants.

Although now widespread in financial markets, circuit breakers remain controversial among researchers and professional investors. We formalize the popular argument that circuit breakers provide a “cooling-off” period for investors during market runs and we test it in the laboratory. Our experiment reproduces a market where investors fear future liquidity shocks but receive news about the true state over time. Notably, we find that when information quality is poor circuit breakers can have perverse effects on trading behavior. However, when information quality is high, circuit breakers can improve welfare by providing agents with time to learn about the true state, when private incentives to wait for more information are insufficient.

For the very first time, in the Spring of 2023, the European Commission (EC) carried out a survey across all member states to assess their level of financial literacy. This survey complements other national surveys and fills an important gap because it provides a consistent metric that allows comparisons among the European Union (EU) countries. The motivation behind the EC’s survey stems from the need to advance the state of financial literacy to safeguard financial stability and promote important projects, such as the creation of a Capital Markets Union. In this paper, we analyze these new data and confirm findings in the literature about the importance of being financially knowledgeable to achieve good financial outcomes. Unfortunately, the survey also confirms that barely one in two individuals, on average in the EU, is financially literate.

Some regulations do not only reduce human deaths, injuries, and illnesses; they also protect nonhuman animals. Regulatory Impact Analyses, required by prevailing executive orders, usually do not disclose or explore benefits or costs with respect to nonhuman animals, even when those benefits or costs are significant. This is an inexcusable gap. If a regulation prevents dogs, horses, or cats from being killed or hurt, the benefits should be specified and quantified. This proposition holds even if those benefits are in some sense incidental to the main goal of the regulation. At the same time, turning the relevant benefits into monetary equivalents raises serious challenges, akin to those raised by the valuation of statistical children.

We propose an easy to implement yield curve extrapolation method to determine long-term interest rates suitable for regulatory valuation. We empirically evaluate this approach for the German nominal bond market, by estimating the model on bonds with maturities up to 20 years and assessing the out-of-sample performance for bonds with maturities beyond 20 years. Even though observed long-term yields are somewhat lower than the predicted yields, the method performs quite well empirically given its simplicity. We perform a case study on pension fund liability valuation and show that our proposed method would have a substantial impact on liability values.

This study investigates herd behavior exhibited by pension funds in the sovereign bond market before, during and after the European debt crisis. It uses unique monthly data on sovereign bond holdings of pension funds and transactions between December 2008 and December 2014. The dataset covers 67 large Dutch pension funds that invest in bonds from 109 countries. We find evidence of intensive herd behavior of Dutch pension funds in sovereign bonds. We also distinguish between European countries which suffer from the European debt crisis, such as Cyprus, Greece, Ireland, Italy, Portugal and Spain, and those that have not. We find high sell herding and low buy herding for the crisis countries during the European debt crisis, whereas in the non-crisis period their herd behavior does not differ substantially from that in non-crisis countries. When we control for institutional, macroeconomic, financial market and pension fund factors, sell herding in crisis countries is still significantly higher. However, we find no evidence of destabilizing behavior with respect to bonds of crisis countries during the European debt crisis.

Policymakers need to know if the structure of competition and the degree of banking market concentration change the incidence of financial crises. Previous studies have not always come to clear conclusions. We use a new dataset of 19 countries where we include capital adequacy and house price growth as factors affecting crisis incidence, and we find a positive role for bank concentration in reducing incidence. In addition, we look at New Industrial Economics indicators of market structure and find that increased market power also reduces crisis incidence. We conclude that attempts to increase competition in banking, although welcome for welfare reasons, should be accompanied by increases in capital standards.

Between 1800 and 1820, Buenos Aires and the former colonial Viceroyalty of Rio de la Plata faced an unprecedented fiscal crisis caused by the revolutionary wars, eventually solved by levying forced loans. This paper considers the unintended institutional consequences of these loans. The novel devices allowed (1) the holders of forced-loan coupons to use these bonds to pay off debts incurred in customs duties and (2) the holders of bills of exchange involved in the provisioning of the military to use these bills to pay part of their forced loans. Starting with the conceptualisation of the institutional order as a complex system, this paper examines the interactions among the circulation of financial paper bills, the financing of war and changes in the position of the merchants' guild and the legal framework for Atlantic trade. It thereby contributes to renewing institutional change approaches in the Spanish-American context.

We developed an expensiveness index and used the Food Acquisition and Purchase Survey data set to examine empirically whether Supplemental Nutrition Assistance Program (SNAP) participants pay higher prices compared with nonqualifying and qualifying, but nonparticipating, households. Purchasers’ ability to minimize food expenditures has significant effects on the program’s effectiveness and on participants’ food security. Using ordinary least squares and two techniques that control for the endogeneity of SNAP participation, we found no significant effect of SNAP participation on food prices. Moreover, we found that SNAP participants pay, on average, lower prices than do nonparticipants. We conclude by providing suggestions for policy improvements and implications for future research.

Although federal regulation of vehicle fuel economy is often seen as environmental policy, over 70% of the estimated benefits of the 2017–2025 federal standards are savings in consumer expenditures on gasoline. Rational-choice economists question the counting of these benefits since studies show that the fuel efficiency of a car is reflected in its price at sale and resale. We contribute to this debate by exploring why most consumers in the United States do not purchase a proven fuel-saving innovation: the hybrid-electric vehicle (HEV). A database of 110 vehicle pairs is assembled where a consumer can choose a hybrid or gasoline version of virtually the same vehicle. Few choose the HEV. A total cost of ownership model is used to estimate payback periods for the price premiums associated with the HEV choice. In a majority of cases, a rational-choice explanation is sufficient to understand consumer disinterest in the HEV. However, in a significant minority of cases, a rational-choice explanation is not readily apparent, even when non-pecuniary attributes (e.g., performance and cargo space) are considered. Future research should examine, from a behavioral economics perspective, why consumers do not choose HEVs when pricing and payback periods appear to be favorable.

Taxation is accepted as a fact of modern life, despite recurring political conflict over the nature and direction of fiscal policies. Most financiers regard obligations issued by the state as a safe investment option. Neither taxation nor state obligations were taken for granted during much of the history of public finance, however, at least not before the early 1800s. The ‘tax state’ developed in fits and starts, driven by the exigencies of warfare, which provided the main rationale for raising state income. Although wartime fiscal innovations eventually facilitated the rise of an efficient military state, the options available for implementing such improvements and preferences for specific fiscal or financial instruments varied greatly across early modern states. Focusing on the ‘long’ eighteenth century, this introduction presents a framework for assessing these differences and introduces the other articles in this special issue.

Heavy-tailed distributions have been observed for various financial risks and papers have observed that these heavy-tailed distributions are power law distributions. The breakdown of a power law distribution is also seen as an indicator of a tipping point being reached and a system then moves from stability through instability to a new equilibrium. In this paper, we analyse the distribution of operational risk losses in US banks, credit defaults in US corporates and market risk events in the US during the global financial crisis (GFC). We conclude that market risk and credit risk do not follow a power law distribution, and even though operational risk follows a power law distribution, there is a better distribution fit for operational risk. We also conclude that whilst there is evidence that credit defaults and market risks did reach a tipping point, operational risk losses did not. We conclude that the government intervention in the banking system during the GFC was a possible cause of banks avoiding a tipping point.

Economists understand that a fit for purpose policy regime requires a reliable general equilibrium model of the system in question and a well specified description of the objectives that the policymaker is trying to pursue. The current financial stability regime has neither and without these critical foundations the regime is fundamentally fragile and incomplete. There is no anchor on the conduct of policy, an absence in genuine accountability and, as a result, reputational risks for policy institutions.

Financial supervision focuses on the aggregate (macroprudential) in addition to the individual (microprudential). But an agreed framework for measuring and addressing financial imbalances is lacking. We propose a holistic approach for the financial system as a whole, beyond banking. Building on our model of financial amplification, the financial cycle is the key variable for measuring financial imbalances. The cycle can be curbed by leverage restrictions that might vary across countries. We make concrete policy proposals for the design of macroprudential instruments to simplify the current framework and make it more consistent.

‘Too big to fail’ traditionally refers to a bank that is perceived to generate unacceptable risk to the banking system and indirectly to the economy as a whole if it were to default and be unable to fulfill its obligations. Such a bank generally has substantial liabilities to other banks through the payment system and other financial links, which can be sources of ‘contagion’ if a bank fails. The main objectives in this paper are to identify the different dimensions of too big to fail and evaluate various proposed reforms for dealing with this problem. In addition, we document the various dimensions of size and complexity, which may contribute to or reduce a bank's systemic risk. Furthermore, we provide an assessment of economic and political factors shaping the future of too big to fail.

Motivated by repeated price spikes and crashes over the last decade, weinvestigate whether the growing market shares of futures speculatorsdestabilize commodity spot prices. We approximate conditional volatility andanalyze how it is affected by speculative open interest. In this context, wesplit our sample into two equally long subperiods and document whether thespeculative impact on conditional volatility increases. With respect to sixheavily traded agricultural and energy commodities, we do not find robustevidence that this is the case. We thus conclude that the financializationof raw material markets does not make them more volatile.

This paper examines a natural experiment in which Washington State teachers were offered the opportunity to choose between enrolling in a traditional defined benefit (DB) plan and a hybrid plan with DB and defined contribution (DC) components. We find plan preference is weakly related to estimates of the relative financial benefits of being in either the DB or hybrid system and strongly related to teacher age. Importantly, we also find that the majority of teachers prefer the hybrid plan, and that teachers opting into the hybrid plan tend to be more effective based on student output measures of teacher productivity. These results suggest that policy shifts toward pension systems that include DC options do not necessarily make teaching a less desirable profession, particularly for the most productive employees.

Sponsors of defined contribution plans often hire financial advisors to help them design and monitor their plans. I find that advisors have a significant impact on the menu of investment options of their clients’ plans. Clients of the same advisor tend to hold the same funds and fund families. They also tend to delete and add the same funds. Advisors’ plans are similar to their clients’ plans in that they tend to hold identical funds, use the same fund families, and fund categories. Thus, to a large extent, advisors take their own advice. However, funds that are in clients’ plans but not in their advisors’ plans have higher expense ratios than the funds held by advisors. Since advisors’ compensation is often tied to the expense ratio of their clients’ funds, this pattern is consistent with misaligned incentives on the part of advisors and their clients.