The Economist reports on “The race to redefine cross-border finance:”
SWIFT recently launched SWIFT Go for retail payments.
FinTech firms often partly bypass SWIFT by aggregating payments first.
Ripple evades SWIFT, using a cryptocurrency for international transactions.
Credit card companies build infrastructure independent of SWIFT for retail (push) payments initiated by the sender.
JPMorgan Chase and a Singaporean bank and Temasek launched Partior for wholesale payments. This network records transfers on a permissioned blockchain.
CBDCs could enable banks to make overseas payments on a shared ledger.
SWIFT tries to collaborate with central banks.
Partior aims to expand, recruiting core settlement banks for both central-bank and commercial-bank digital payments in euro, renminbi and

After 12 years of service Dirk Niepelt resigns as the director of the Study Center to take up a post as Full Professor of Macroeconomics at the University of Bern. The Governing Board and Foundation Council
thank him for the outstanding achievements of the centre under his leadership. He has played a major role in building up the Study Center Gerzensee as a place of learning and a venue for academic research and dialogue, in preparing it to meet future challenges, and in bolstering its international presence.
Dirk Niepelt will be succeeded by Martin Brown who is currently Full Professor of Banking at the University of St. Gallen.
With his academic record, management experience and extensive network in economics, Martin Brown is ideally suited to lead the Study Center in accordance

The FT (and many other outlets) summarize a report by law firm WilmerHale which was commissioned by the World Bank:
… in the 2018 edition of Doing Business, China’s overall ranking had been artificially held at 78 — the same as in the previous year — as a result of late changes that elevated its position from 85. The report alleges that Georgieva led efforts to improve China’s ranking at a time when she was “engrossed” in a campaign to secure a capital increase for the World Bank.
… during the preparation of Doing Business 2018, high-ranking Chinese government officials “repeatedly expressed their concerns” to then World Bank president Jim Yong Kim and other senior bank managers
… attempts were made in the days before publication of Doing Business 2018 to raise China’s ranking from

In the FAZ, Christian Siedenbiedel discusses a ZEW study on the positions of ECB board members and how they relate to national debt levels.
Es gibt klare Fraktionen von „Falken“ und „Tauben“ im Rat, und es gibt eine gewisse Korrelation zur Höhe der Staatsschulden im jeweiligen Heimatland des Ratsmitglieds. Als „Tauben“ wurden nach der Daten-Auswertung die Ratsmitglieder Ignazio Visco (Italien), Pablo Hernández de Cos (Spanien), François Villeroy de Galhau (Frankreich), Giannis Stournaras (Griechenland und Mario Centeno (Portugal) eingestuft. Auf der anderen Seite bestehe die klare „Falken“-Fraktion aus Jens Weidmann (Deutschland), Robert Holzmann (Österreich), Klaas Knot (Niederlande), Pierre Wunsch (Belgien) und Martins Kazaks (Lettland).
Die Klassifizierung der

In the NZZ, Hansueli Schöchli summarizes recent evidence.

Wer in der Schweiz im Jahr 2017 wie viel Einkommenssteuer bezahlte

Anteil Steuerpflichtige (in Prozent)
Anzahl Steuerpflichtige
Minimales Reineinkommen in Fr.
Durchschnittliche Steuerbelastung (in %)
Anteil der Einkommenssteuer Bund/Kanton/Gemeinde (in %)
0,01
515
4 548 020
43,8
4,82
0,1
5 150
1 109 760
37,3
9,89
1
51 498
331 731
34,4
24,04
5
257 489
152 799
28,1
42,55
10
514 978
111 403
24,6
53,03
25
1 287 444
73 769
20,7
74,13
50
2 574 888
49 989
18
90,24

Lesebeispiel: Die obersten 0,01% der Steuerpflichtigen deklarierten ein Reineinkommen von jeweils über 4,5 Mio. Fr. Sie hatten im Mittel eine Steuerbelastung auf ihren Einkommen von 43,8%. Diese Gruppe zahlte insgesamt 4,8% aller Einkommenssteuern in der Schweiz.

MA course at the University of Bern.
Time: Wed 10-12. Location: A-126 UniS. Course assistant: Stefano Corbellini.
The course introduces Master students to modern macroeconomic theory. Building on the analysis of the consumption-saving tradeoff and on concepts from general equilibrium theory, the course covers workhorse general equilibrium models of modern macroeconomics, including the representative agent framework, the overlapping generations model, and the Lucas tree model. Lectures follow chapters 1–4 (possibly 5) in this book.
SARS-COV 2: Until further notice the course is offered on-site and a podcast is made available. It is our joint responsibility to reduce the risk of infection in class. Only students who satisfy two criteria should attend class: (i) They should not feel ill

Sollte die SNB dem Fed und der EZB folgen und ihre
Strategie überarbeiten? Einiges spricht dafür. Doch ebenso wichtig ist eine
Strategieüberprüfung ausserhalb der SNB: Die Notenbank kann und darf nicht allein
über die Rahmenbedingungen entscheiden, unter denen sie agiert.
Das amerikanische
Federal Reserve System (Fed) und die Europäische Zentralbank (EZB) haben jüngst
ihre jeweiligen Strategien überarbeitet, um veränderten Rahmenbedingungen
Rechnung zu tragen. Auch die Schweizerische Nationalbank (SNB) agiert in einem sich wandelnden
Umfeld. Ihre Strategie stammt
aus einer Zeit vor Bilanzausweitung, Mindestkurs und Negativzinsen, und ihre
Stellung war wiederholt Gegenstand politischer Kontroversen — man denke etwa an
die Diskussionen um Vollgeld oder Gewinnausschüttungen. Sollte

NZZ, August 10, 2021. PDF (title changed by NZZ).
Should the SNB follow the Fed and the ECB and rework its strategy? There is a case for rethinking the broad inflation target, the monetary policy concept, and the communication strategy. Equally important is a strategy review outside of the SNB: The SNB cannot and must not decide about the framework within which it operates.
Conclusion:

Daher ist eine Strategieüberprüfung inner- und ausserhalb der SNB sinnvoll. Geldpolitisch prüfenswert sind das Inflationszielband, die Zentralität des Zinsinstruments und die Kommunikation. Die Glaubwürdigkeit der SNB verbietet ein Auseinanderklaffen von Theorie und Praxis, aber auch allzu häufiges und detailversessenes Feilen an der Strategie, und sie verlangt Konzentration auf das Wesentliche.

NZZ, August 10, 2021. PDF (title changed by NZZ).
Should the SNB follow the Fed and the ECB and rework its strategy? There is a case for rethinking the broad inflation target, the monetary policy concept, and the communication strategy. Equally important is a strategy review outside of the SNB: The SNB cannot and must not decide about the framework within which it operates.
Conclusion:

Daher ist eine Strategieüberprüfung inner- und ausserhalb der SNB sinnvoll. Geldpolitisch prüfenswert sind das Inflationszielband, die Zentralität des Zinsinstruments und die Kommunikation. Die Glaubwürdigkeit der SNB verbietet ein Auseinanderklaffen von Theorie und Praxis, aber auch allzu häufiges und detailversessenes Feilen an der Strategie, und sie verlangt Konzentration

John Cochrane on the role of cheap clean energy which by itself will not reduce CO2 in the long run:
The standard vision in policy discussions assumes infinite substitutability. As soon as the cost of clean energy is lower than the cost of carbon-emitting energy, everyone substitutes completely to the latter and the oil and coal stay in the ground. … But as long as the elasticity of substitution is finite … then the carbon comes out of the ground. As you use less and less, the remaining uses become more and more valuable, so it’s worth it, privately and to society, to keep using it although at lower scale.
So I learn from this that a key focus for R&D is not so much on lowering the cost of alternatives, but increasing their substitutability for fossil fuels. Just because the cost of

John Cochrane on climate change and financial stability:
Climate change and financial stability are pressing problems. They require coherent, intelligent, scientifically valid policy responses, and promptly. But climate financial regulation will not help the climate, will further politicize central banks, and will destroy their precious independence, while forcing financial companies to devise absurdly fictitious climate-risk assessments will ruin financial regulation. The next crisis will come from some other source. And our climate-obsessed regulators will once again fail utterly to anticipate it—just as a decade’s worth of stress testers never considered the possibility of a pandemic.

In a CEPR discussion paper, Anna Gelpern, Sebastian Horn, Scott Morris, Brad Parks, and Christoph Trebesch document “How China Lends: A Rare Look into 100 Debt Contracts with Foreign Governments:”
China is the world’s largest official creditor, but we lack basic facts about the terms and conditions of its lending. … We collect and analyze 100 contracts between Chinese state-owned entities and government borrowers in 24 developing countries … First, the Chinese contracts contain unusual confidentiality clauses that bar borrowers from revealing the terms or even the existence of the debt. Second, Chinese lenders seek advantage over other creditors, using collateral arrangements such as lender-controlled revenue accounts and promises to keep the debt out of collective restructuring (“no

In his University of St. Gallen MA thesis entitled “CBDC with Collateralized Pass-Through Funding,” Bastian Wetzel assesses how strongly banks would be affected by deposit outflows into retail CBDC:
The results of the study show that 92.7 percent of all sight deposits in the aggregate Swiss banking sector are covered by excess liquidity and eligible assets, whereas sight deposits held in CHF are covered by over 100 percent. Therefore, the collateral constraint seems to be a problem only in the unlikely event where almost all sight deposits converted to CBDC. As expected, refinancing costs decline when disintermediation is low due to negative interest rates on deposits at the SNB. As disintermediation increases, funding costs rise. Thus, if disintermediation is high, the net result

In an NBER working paper, Matthias Fleckenstein and Francis Longstaff argue that Treasuries do not trade at a premium:
It is widely believed that Treasuries trade at premium prices because of their safety and money-like properties. In reality, this is only true on a relative basis when compared to other bonds, but is often not true on an absolute basis. Many Treasuries have repeatedly traded at substantial discounts to their intrinsic fair values for extended periods during the past 25 years. Since 2015, Treasuries have consistently been priced at an aggregate discount of $100 to $300 billion below their fair values. Treasuries often actually become cheaper following crises. These results provide new perspectives on safe-asset theories.

The NZZ argues that Switzerland is stuck (presumably when compared with first best, not relative to other countries), and it features evidence in a series of columns.

The ECB’s new monetary policy strategy.

In the FAZ, Christian Siedenbiedel reports that Deutsche Bank questions whether a digital Euro as envisioned by the ECB (i.e., with tight quantity restrictions) would be successful:
Die Argumentation geht so: Die EZB will den digitalen Euro einführen, um auf den verstärkten Währungswettbewerb zu antworten. … Um sich vor solchem Machtverlust sowohl durch Digitalgeld von anderen Notenbanken („Krypto-Dollars“) als auch durch privates Digitalgeld („Global Stable Coins“) zu schützen, treibe die EZB den Digitaleuro voran. Also aus längerfristigen politischen Motiven. Dabei sei unklar, ob der digitale Euro sich international am Markt durchsetzen könne und ob die Menschen in der Eurozone dafür überhaupt Bedarf hätten. “Das Design des digitalen Euros, soweit bisher bekannt, lässt erwarten,

In the NBER working paper “Dissecting Green Returns,” Lubos Pastor, Robert Stambaugh, and Lucian Taylor argue that excess returns on green assets during recent years are unlikely to predict expected excess returns. At least that’s what theory suggests:

… green assets have lower expected returns than brown, due to investors’ tastes for green assets, yet green assets can have higher realized returns while agents’ tastes shift unexpectedly in the green direction. … green tastes can shift in two ways. First, investors’ preference for green assets can increase, directly driving up green asset prices. Second, consumers’ demands for green products can strengthen—for example, due to environmental regulations—driving up green firms’ profits and thus their stock prices.

In the data

… green

Goodreads rating 4.04.
Seine Wunde blühte, sein Leid strahlte, sein Ich war in die Einheit geflossen. …
Weisheit ist nicht mitteilbar. Weisheit, welche ein Weiser mitzuteilen versucht, klingt immer wie Narrheit. …
Mir aber liegt einzig daran, die Welt lieben zu können, sie nicht zu verachten, sie und mich nicht zu hassen …

In a new working paper the Swiss Bankers Association identifies challenges for banks. Nevertheless it argues that
[a]ny conclusion that the status quo is the least risky option seems premature and shortsighted.
…
The introduction of digital currencies and design questions regarding payment methods and infrastructure represent strategic business as well as political challenges on which public authorities and business must take a productive position. An informed discussion on the design and implementation of digital currencies is essential. It is time for the general public to consider these issues and drive the opinion-forming process.

Finanz und Wirtschaft, June 5, 2021. PDF.
The debt brake addresses some political economy frictions, but not others.
Focusing too narrowly on explicit government debt it provides incentives to accumulate implicit debt, sell assets, or engage in creative accounting.
The political pressure to raise SNB profit disbursements is a symptom of these incentives.

In a CEPR discussion paper, Andreas Fuster, Tan Schelling, and Pascal Towbin analyze how banks respond to changes in the threshold level above which reserves held at the central bank are charged negative interest:
… exploiting an unexpected decision by the Swiss National Bank in September 2019 to change the threshold calculation without taking any other policy actions. This change led to a large increase in overall exemptions, but with variation across banks. Using a difference-in-differences approach, we find that banks that experience a larger increase in their exemption threshold tend to raise their SNB sight deposit holdings, funded through more interbank borrowing and more customer deposits. The interbank market is important for the funding choice: banks with low collateral

Goodreads rating 4.22.
Your fear of death is but the trembling of the shepherd when he stands before the king whose hand is to be laid upon him in honour.
…
Surely there is no greater gift to a man than that which turns all his aims into parching lips and all life into a fountain. And in this lies my honour and my reward,—That whenever I come to the fountain to drink I find the living water itself thirsty; And it drinks me while I drink it.
…
If these be vague words, then seek not to clear them. Vague and nebulous is the beginning of all things, but not their end, And I fain would have you remember me as a beginning.

In an NBER working paper, Jose Maria Barrero, Nicholas Bloom, and Steven J. Davis argue, based on a survey of 30 000 Americans, that
… 20 percent of full workdays will be supplied from home after the pandemic ends, compared with just 5 percent before. … better-than-expected WFH experiences, new investments in physical and human capital that enable WFH, greatly diminished stigma associated with WFH, lingering concerns about crowds and contagion risks, and a pandemic-driven surge in technological innovations that support WFH.
They predict:
First, employees will enjoy large benefits from greater remote work, especially those with higher earnings. Second, the shift to WFH will directly reduce spending in major city centers by at least 5-10 percent relative to the pre-pandemic situation.

Ifo Schnelldienst 4/2021, April 14, 2021. PDF.

Was Schuldengrenzen aus politökonomischer Sicht besonders attraktiv erscheinen lässt – ihre vermeintliche Einfachheit und Klarheit – birgt also auch Risiken. Es führt dazu, dass Politiker und ihre Wähler die Solidität der Staatsfinanzen über Gebühr an expliziten Bruttoschulden messen. Was aber zählt, wenn es um unerwünschte Umverteilung zulasten künftiger Generationen geht, ist staatliches Nettovermögen in einer umfassenden Gesamtschau.

Ifo Schnelldienst 4/2021, April 14, 2021. PDF.

Was Schuldengrenzen aus politökonomischer Sicht besonders attraktiv erscheinen lässt – ihre vermeintliche Einfachheit und Klarheit – birgt also auch Risiken. Es führt dazu, dass Politiker und ihre Wähler die Solidität der Staatsfinanzen über Gebühr an expliziten Bruttoschulden messen. Was aber zählt, wenn es um unerwünschte Umverteilung zulasten künftiger Generationen geht, ist staatliches Nettovermögen in einer umfassenden Gesamtschau.

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Weekly SNB Sight Deposits and Speculative Positions: SNB selling euros and dollars
2021-04-12

Update April 12 2021: SNB selling euros and dollars. Sight

On VoxEU, Paul Krugman reviews Mundell’s work in international finance and his impact on supply side economics.

Economic Journal, February 2021, with Harris Dellas. PDF.
We study the optimal debt and investment decisions of a sovereign with private information. The separating equilibrium is characterised by a cap on the current account. A sovereign repays debt amount due that exceeds default costs in order to signal creditworthiness and smooth consumption. Accepting funding conditional on investment/reforms relaxes borrowing constraints, even when investment does not create collateral, but it depresses current consumption. The model contains the signalling elements emphasised by creditors in the Greek austerity programmes and is consistent with the reduction in the loans issued by Greece and their interest rate following the 2015 election.

MA course at the University of Bern.
The classes follow selected chapters in the textbook Macroeconomic Analysis (MIT Press, 2019) and build on the material covered in the macro II course which follows the same text. Table of contents of the book. Page with more information about the book and exercises. Uni Bern’s official course page. Zoom link is posted on ILIAS page.
Main contents:
Concepts.
RA model with government spending and taxes.
Government debt in RA model.
Government debt and social security in OLG model.
Neutrality results.
Consolidated government budget constraint.
Fiscal effects on inflation. Game of chicken.
FTPL. Active and passive policies.
Tax smoothing.
Time consistent policy.
Sovereign debt.

VoxEU, February 5, 2021. HTML.
Based on CEPR DP 15457, I assess possible implications of the introduction of retail CBDC for bank profits. The model implies annual implicit subsidies to U.S. banks of up to 0.8 percent of GDP during the period 1999-2017.