On their blog, Stephen Cecchetti and Kermit Schoenholtz voice doubts regarding the usefulness of universal central bank digital currency (U-CBDC). They argue:
… in an effort to retain their deposit base, commercial banks would surely raise the interest rate they offer to their customers relative to the rate on U-CBDC. … the introduction of U-CBDC would cause a substantial fraction of deposits to shift to the central bank, with the remainder prone to exit in a period of financial stress.
… if the Federal Reserve were to issue U-CBDC, we expect that this would not only hollow out the U.S. commercial banking system, but also destabilize the financial system in a range of countries.
… what would the central bank become? As its U-CBDC liabilities grow, its assets will need to expand as

Central bankers often argue that CBDC would increase the risk of bank runs. On his blog, JP Koning rejects this notion. After all, he retorts, during a confidence crisis bank customers would no longer have to queue to withdraw cash; lender of last resort support would be provided much more quickly; and “large” cash holders would continue to shift funds into treasury bills, not into CBDC.
Koning writes:
The general criticism here is that during a crisis, households and businesses will desperately shift their deposits into the ultimate risk-free asset: central bank money. Presumably when deposits were only redeemable in banknotes (as is currently the case) and one had to trudge to an ATM to get them, this afforded people time for sober contemplation, thus rendering runs less damaging.

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Die Schweizerische Nationalbank hat dem E-Franken eine Absage erteilt – zu Unrecht, sagt Dirk Niepelt im Interview mit finews.ch. Der Direktor des SNB-nahen Studienzentrums Gerzensee erklärt, warum digitales Geld Vorteile bringt.
Vergangene Woche hat sich Andréa Mächler, Mitglied des dreiköpfigen Direktoriums der Schweizerischen Nationalbank (SNB), kritisch zur Einführung eines elektronischen Frankens durch die SNB geäussert, wie auch finews.ch berichtete. Im Folgenden geht Dirk Niepelt vom Studienzentrum Gerzensee vertieft auf das Thema einer digitalen Zentralbankenwährung ein und nennt die Auswirkungen, welche diese hätte.
Herr Niepelt, was ist der Unterschied zwischen einer Kryptowährung

In the NZZ, Werner Enz reports that the insurance company AXA will stop offering “Vollversicherungen.” One motivation relates to the fact that the second pillar in the Swiss pension system is increasingly abused, with redistribution undermining supposedly “individual” accounts.

Finews.ch, April 9, 2018. PDF.
Andreas Britt interviewed me. I describe the consequences of “Reserves for All” and point to potential benefits.

A reminder not to be overly impressed when presented with statistically significant coefficients, from FiveThirtyEight.com.

A global heat map based on data collected by the Strava fitness app, representing 700 million activities; a total distance of 16 billion km; and a total recorded activity duration of 100 thousand years.

Noyb.eu.
Many companies ignore the stringent privacy laws in Europe. This is possible, because it is too complicated and expensive for individual users to claim their rights. noyb will close the gap between law and the reality by collectively enforcing your rights, so that your rights become reality.

Kontantupproret (“cash rebellion”) in Sweden—not everybody is pleased with the prospect of a cashless society.
David Crouch reports in The Guardian.

The Journal of Economic Dynamics and Control has published a special issue with the papers of the conference on “Fiscal and Monetary Policies” that the Study Center Gerzensee co-organized with the JEDC, the St. Louis Fed, the University of Bern, and the Swiss National Bank.
This earlier post contains a link to the conference program.

In a Staff Working Paper, the Bank of England’s Philip Bunn, Alice Pugh, and Chris Yeates discuss how monetary policy easing following the financial crisis affected income and wealth of different age groups.
The authors analyze survey panel data (ONS Wealth and Assets Survey) on households’ characteristics and balance sheet positions. They argue that
the overall effect of monetary policy on standard relative measures of income and wealth inequality has been small. Given the pre-existing disparities in income and wealth, we estimate that the impact on each household varied substantially across the income and wealth distributions in cash terms, but in percentage terms the effects were broadly similar. We estimate that households around retirement age gained the most from the support to

A BIS report submitted by the Committee on Payments and Market Infrastructures and the Markets Committee discusses potential implications of the introduction of central bank digital currency for payments, monetary policy, and financial stability.
From the executive summary
… CBDC is potentially a new form of digital central bank money that can be distinguished from reserves or settlement balances held by commercial banks at central banks. There are various design choices for a CBDC, including: access (widely vs restricted); degree of anonymity (ranging from complete to none); operational availability (ranging from current opening hours to 24 hours a day and seven days a week); and interest bearing characteristics (yes or no).
… Two main CBDC variants are … a wholesale and a general

In the FT, Martin Arnold reports about plans to launch “Saga,” a reserves-backed krypto currency, maybe the closest substitute yet to central bank digital currency.
It is being launched by a Swiss foundation with an advisory board featuring Jacob Frenkel, … Myron Scholes, … and Dan Galai, co-creator of the Vix volatility index. The currency aims to avoid the wild price swings of many cryptocurrencies by tethering itself to reserves deposited in a basket of fiat currencies at commercial banks. Holders of Saga will be able to claim their money back by cashing in the cryptocurrency.
Saga also aims to avoid the anonymity of bitcoin that raises financial crime concerns with regulators and bankers. It will require owners to pass anti-money laundering checks and allow national authorities to

Reto Föllmi und Fabian Schnell haben sich in einem vor Kurzem veröffentlichten Beitrag auf der Ökonomenstimme gegen die Einführung eines "Krypto-Frankens" ausgesprochen. Hier folgt eine Replik von Dirk Niepelt, der darauf hinweist, dass es durchaus Vorteile eines Krypto-Frankens gebe.
Unter dem Titel "Die Schweiz braucht keinen
Krypto-Franken" haben sich Reto Föllmi und Fabian Schnell in der NZZ und auch
auf der Ökonomenstimme gegen einen durch die Schweizerische Nationalbank (SNB) emittierten
digitalen Franken ausgesprochen.[ 1 ]
Föllmi und Schnell thematisieren primär privat
emittierte Kryptowährungen wie Bitcoin, und sie suggerieren, dass zwischen
diesen und digitalem Zentralbankgeld enge Parallelen bestünden. Doch dem ist
nicht so. Kryptowährungen sind für die Diskussion um

In the FT, Mehreen Khan and Aliya Ram report that MasterCard and IBM plan to create a “data trust” to allow businesses with EU customers to meet the strict General Data Protection Regulation (GDPR) provisions that come into effect by the end of May. “Truata” will be based in Dublin.
The independent company, called Truata, will manage, anonymise and analyse vast amounts of personal information held by companies such as travel agents and insurers in a way that is compliant under the EU’s General Data Protection Regulation (GDPR). …
Truata will strip data sets of key details such as a person’s name, contact details or email address so they cannot be re-identified from the information. It will also offer analytical services to allow a business to extract valuable information from the

NZZ, March 15, 2018. PDF.
CBDC is not the same as krypto currencies.
Easy arguments against CBDC are misleading.
Switzerland should not dismiss CBDC too quickly.
(The title of the article is misleading, it is not mine. I argued for openness in the discussion rather than for adoption.)

In an NBER working paper, Niels Johannesen, Patrick Langetieg, Daniel Reck, Max Risch, and Joel Slemrod discuss the effects of recent U.S. tax enforcement initiatives on tax compliance. They offer background information about U.S. initiatives since 2009 and conclude, based on administrative microdata, that
[e]nforcement caused approximately 60,000 individuals to disclose offshore accounts with a combined value of around $120 billion. Most disclosures happened outside offshore voluntary disclosure programs by individuals who never admitted prior noncompliance. The disclosed accounts were concentrated in countries whose institutions facilitate tax evasion. The enforcement-driven disclosures increased annual reported capital income by $2.5-$4 billion corresponding to $0.7-$1.0 billion in

In the FT, Ralph Atkins reports that Romeo Lacher, Chairman of SIX group, supports the idea of Switzerland introducing an ‘E-Franc.’

CEPR Discussion Paper 12755, February 2018. PDF. (Personal copy.)
This paper reviews theoretical results on financial policy. We use basic accounting identities to illustrate relations between gross assets and liabilities, net debt positions and the appropriation of (primary) budget surplus funds. We then discuss Ramsey policies, answering the question how a committed government may use financial instruments to pursue its objectives. Finally, we discuss additional roles for financial policy that arise as a consequence of political frictions, in particular lack of commitment.

MA course at the University of Bern.
The classes follow chapters 11–13 in this text and build on the material covered in chapters 1–5. Uni Bern’s official course page. The course TA is Christian Myohl.
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.
Primal and dual approach.
Tax smoothing.
Time consistent policy.

In an NBER working paper, Arvind Krishnamurthy, Stefan Nagel, and Annette Vissing-Jorgensen analyze which components of bond yields were affected by the European Central Bank’s government bond purchasing programs.
Given the institutional restrictions on monetary policy in the Euro area, the ECB had to carefully argue why it intervened in the first place. (To many, the case was obvious; the ECB intervention amounted to quasi-fiscal policy. But an intervention with this objective would not be covered by the rules of the Euro area.) It gave two reasons for the SMP, OMT, and LTRO:

The ECB has publicly stated that these policies reduce redenomination risk, i.e., the risk that the Eurozone might break up and countries redenominate domestic debt into new domestic currencies, and financial

The new edition features an interview with Roger Farmer. PDF.

In the NZZ, Daniel Imwinkelried reports about the effect of cost pressure on the organizational structure of banks: fewer layers of control.
So bestand das Schweizer Privatkundengeschäft der Credit Suisse (CS) bis vor kurzem aus drei Ebenen, nämlich zehn Regionen, den Marktgebieten und den Teams. Die mittlere Stufe wurde abgeschafft, die ehemaligen Chefs mussten die Bank verlassen oder erhielten eine neue Aufgabe. Im Schweizer Privatkundengeschäft der CS kamen einst im Durchschnitt auf einen Vorgesetzten 4,2 Mitarbeiter; nun strebt die Bank ein Verhältnis von 1 zu 7 an. Damit ziele man auf eine schlagkräftigere Führung, sagte jüngst Serge Fehr, der Leiter des Privatkundenbereichs, an einem Anlass.

At an MIT book launch in Zurich, David Shrier and Alex Pentland advertized a new book co-edited by them, “New Solutions for Cybersecurity.” Some takeaways from the event:
The really dangerous cyber attacks are yet to come.
All major governments are directly or indirectly involved.
A promising strategy of minimizing risks relies on (i) continuous encryption; (ii) no central storage of data but case by case requests for data; and (iii) log queries to manage/monitor access.
The European General Data Protection Regulation is helpful.
Cybersecurity is big business.

In a CEPR discussion paper, Christoph Trebesch and Jeromin Zettelmeyer argue that
ECB bond buying had a large impact on the price of short and medium maturity bonds … However, the effects were limited to those sovereign bonds actually bought. We find little evidence for positive effects on market quality, or spillovers to close substitute bonds, CDS markets, or corporate bonds.
A multiple equilibria view of the crisis would probably suggest otherwise.

A concise overview with timeline.

A new book by Bryan Caplan. It’s the signalling case.

In the NZZ, Monica Rüthers writes about the history of the border between Konstanz (in Germany) and Kreuzlingen (in Switzerland).
Shoppers have been crossing the border for ages although governments have tried to prevent this with varying fervor. Exchange rate regimes have affected which goods are bought, where.

In the NZZ, Peter Fischer reports that SNB president Thomas Jordan rejects the Vollgeld initiative and stops short of endorsing the ‘reserves for all’ proposal.

… wehrt sich die Nationalbank auch gegen Vorschläge aus akademischen Kreisen, die von der Nationalbank fordern, nicht mehr nur Banken, sondern auch direkt den Schweizer Bürgern elektronisches Zentralbankgeld zur Verfügung zu stellen. Am einfachsten ginge dies, wenn jedermann bei der SNB ein Konto halten könnte. Jordan warnt davor, dass in einem solchen Fall die bewährte Arbeitsteilung zwischen Privatsektor und Zentralbank zur Disposition stünde. Die Fähigkeit der Banken, Kredite zu vergeben und Fristentransformation zu betreiben, würde eingeschränkt. Das

In the NZZ, Peter Fischer reports that SNB president Thomas Jordan rejects the Vollgeld initiative and stops short of endorsing the ‘reserves for all’ proposal.

… wehrt sich die Nationalbank auch gegen Vorschläge aus akademischen Kreisen, die von der Nationalbank fordern, nicht mehr nur Banken, sondern auch direkt den Schweizer Bürgern elektronisches Zentralbankgeld zur Verfügung zu stellen. Am einfachsten ginge dies, wenn jedermann bei der SNB ein Konto halten könnte. Jordan warnt davor, dass in einem solchen Fall die bewährte Arbeitsteilung zwischen Privatsektor und Zentralbank zur Disposition stünde. Die Fähigkeit der Banken, Kredite zu vergeben und Fristentransformation zu betreiben, würde eingeschränkt. Das Finanzsystem würde als Ganzes nicht sicherer, sondern unter Umständen