Decentralized Finance and Central Bank Communication 
 
 
 
 
 
 
 
Magnus Hansson 
 
 
 
 
 
 
 
 
 
 
ACADEMIC THESIS 
Which has been duly authorized for defense in pursuit of the PhD degree  
at the School of Business, Economics and Law, University of Gothenburg,  
to be presented for public examination  
Thursday the 15th of June, at 10:15, am, in lecture hall SEB. 
Department of Economics, Vasagatan 1 
 
Göteborg 2023 
  
Abstract 
Arbitrage in Crypto Markets: An Analysis of Primary Ethereum Blockchain Data 
The Ethereum blockchain is a decentralized computing platform providing peer-to-peer financial services. 
Decentralized exchanges, which run on the blockchain, enable matching of buyers and sellers without any 
central third party, and are distinct from the centralized “off-chain” cryptocurrency markets often studied in 
the literature. The decentralized markets facilitate trade in cryptocurrencies and other digital assets and 
have daily turnovers of several billion dollars. In this paper, I study how arbitrageurs on the blockchain 
contribute to price discovery and price efficiency in decentralized “on-chain” markets. I collect a transaction-
level dataset of primary data from the Ethereum blockchain and cleanly identify a set of completed cross-
exchange and triangular arbitrages. To investigate the speed at which arbitrage opportunities are eliminated, 
I study how sensitive arbitrage profits are to when the trades execute. I show that most arbitrage profits are 
made immediately after the occurrence of price anomalies, indicating that decentralized markets adjust fast 
after a shock to the no-arbitrage price. 
Keywords: Arbitrage, Price efficiency, Decentralized exchanges, Ethereum, Blockchain, Decentralized finance, 
Automated market maker, Cryptocurrency 
JEL classification: C55, E42, G12, G14, G23 
Price Discovery in Constant Product Markets 
Constant product markets are the most common type of automated market maker designs, which has 
become increasingly popular in the advent of blockchain technology. This paper develops a price discovery 
framework for constant product markets that comprises three parts. Firstly, I derive a quadratic relationship 
which expresses trades in terms of price changes. Secondly, I model trade interactions in a structural VAR 
system. Thirdly, I translate the impulse responses from the VAR to returns through the quadratic equation. 
The empirical analysis reveals how large trades carry important market information and a small but 
sophisticated group of adversarial traders, much like high frequency traders in traditional markets, play a key 
role in price discovery on the largest decentralized exchange Uniswap. 
Keywords: Price discovery, Constant product market, Automated market maker, Decentralized exchange, 
Cryptocurrency, Decentralized finance, Blockchain, Ethereum, MEV, Uniswap 
JEL classification: C55, C57, E42, G12, G14, G23 
Evolution of Topics in Central Bank Speech Communication 
This paper studies the content of central bank speech communication from 1997 through 2020 and asks the 
following questions: (i) What global topics do central banks commonly discuss? (ii) How have these topics 
evolved over time? I turn to natural language processing, and more specifically Dynamic Topic Models, to 
answer these questions. The analysis consists of an aggregate study of nine major central banks and a case 
study of the Federal Reserve, which allows for region specific control variables. I show that: (i) Central banks 
address a broad range of topics. (ii) The topics are well captured by Dynamic Topic Models. (iii) The global 
topics exhibit strong and significant autoregressive properties not easily explained by financial control 
variables, suggesting that the  topics could exhibit a “narrative effect”. 
Keywords: Central bank communication, Monetary policy, Textual analysis, Dynamic topic models, Narrative 
economics 
JEL classification: C38, C55, E52, E58 
ISBN: 978-91-88199-69-0 (tryckt), 978-91-88199-70-6 (PDF) 
Contact Information: Magnus Hansson, Department of Economics, University of Gothenburg, Box 640, 405 30 
Göteborg. Email: magnus.hansson@economics.gu.se