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Dirk Niepelt

Dirk Niepelt

Dirk Niepelt is Director of the Study Center Gerzensee and Professor at the University of Bern. A research fellow at the Centre for Economic Policy Research (CEPR, London), CESifo (Munich) research network member and member of the macroeconomic committee of the Verein für Socialpolitik, he served on the board of the Swiss Society of Economics and Statistics and was an invited professor at the University of Lausanne as well as a visiting professor at the Institute for International Economic Studies (IIES) at Stockholm University.

Articles by Dirk Niepelt

“Fiscal and Monetary Policies,” Bern, Spring 2019

2 days ago

MA course at the University of Bern.
The classes follow these notes and build on the material covered in the macro II course. Uni Bern’s official course page. The course TA is Lukas Völlmy.
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.

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Why Did Swedish Kronor Circulation Decline … Until Now?

16 days ago

On his blog, JP Koning argues that very short conversion periods rendered it unattractive for Swedes to hold cash. He also suggests that it were the banks that pushed for the short periods.
While digital payments share some of the blame for the obsolescence of paper kronor, the Riksbank is also responsible. The Riksbank betrayed the Swedish cash-using public this decade by embarking on an aggressive note switch.  Had it chosen a more customer friendly approach, Swedes would be holding a much larger stock of banknotes than they are now. As long as other countries don’t enact the same policies as Sweden, they needn’t worry about precipitous declines in cash demand.
Recently, the trend decline of kronor cash holdings has reverted. Across the board, the use case for cash seems to change

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Cash Holdings Have Become Less Cyclical

16 days ago

On his blog, JP Koning reports that
[b]oth the Christmas bump and the sawtooth pattern arising from monthly payrolls are less noticeable than previous years. But these patterns remain more apparent for Canadian dollars than U.S. dollars. Not because Canadians like cash more than Americans. We don’t, and are probably further along the path towards digital payments then they are. Rather, the percentage of U.S. dollars held overseas is much larger than Canadian dollars, so domestic usage of U.S. cash for transactions purposes gets blurred by all its other uses.

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Europe’s Response to the US-Iran Sanctions: Accounting Rather than Banking

16 days ago

On Spiegel online, Christoph Schult reports about “Instrument in Support of Trade Exchanges” (Instex), the new special purpose vehicle founded by France, Germany, and the UK with the task to facilitate legitimate trade with Iran. Instex is not meant to bust US sanctions, but to circumvent the banking sector which the the three countries perceive as “overcomplying.”
Eigentlich dürfen europäische Unternehmen alle Waren, die nicht den Sanktionen unterliegen, weiter in den Iran exportieren. Problem ist allerdings, dass fast alle Banken in Europa ablehnen, den Zahlungsverkehr für solche Geschäfte abzuwickeln. Die Geldinstitute haben Angst, sie könnten in den USA bestraft werden. “Overcompliance” von Sanktionen nennen das EU-Diplomaten – Übererfüllung.
Instex ist eine Art Tauschbörse, in der

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SNB Grants Fintechs Access to SIC

January 16, 2019

In a press release the Swiss National Bank explains that it

grants access to … [fintechs] that make a significant contribution to the fulfilment
of the SNB’s statutory tasks, and whose admission does not pose any major risks. Entities with fintech licences whose business model makes them significant participants in the area of Swiss franc payment transactions will therefore be granted access to the SIC system and to sight deposit accounts.
The Swiss Financial Market Supervisory Authority is in charge of granting fintech licences.

Related posts: Swiss stock exchange could lose EU access in January
Will the SNB ever make profits again?
Swiss

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Obtaining a Fintech License in Switzerland

January 15, 2019

Guidelines published by the Swiss Financial Market Supervisory Authority. From the explanations:
The FinTech licence allows institutions to accept public deposits of up to CHF 100 million, provided that these are not invested and no interest is paid on them. A further requirement is that an institution with a FinTech licence must have its registered office and conduct its business activities in Switzerland.

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SNB Grants Fintechs Access to SIC

January 15, 2019

In a press release the Swiss National Bank explains that it

grants access to … [fintechs] that make a significant contribution to the fulfilment
of the SNB’s statutory tasks, and whose admission does not pose any major risks. Entities with fintech licences whose business model makes them significant participants in the area of Swiss franc payment transactions will therefore be granted access to the SIC system and to sight deposit accounts.
The Swiss Financial Market Supervisory Authority is in charge of granting fintech licences.

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“On the Equivalence of Private and Public Money,” Mimeo, 2019

January 6, 2019

Mimeo, January 2019, with Markus Brunnermeier. PDF.
We propose a generic model of money and liquidity. We provide sufficient conditions under which a swap of private (inside) against public (outside) money leaves the equilibrium allocation and price system unchanged. We apply the results to Central Bank Digital Currency, the “Chicago Plan,” and the Indian de-monetization experiment.

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The Best Economists

December 28, 2018

The Economist characterizes the work of who it views as the eight best economists of the decade. Most of their work is empirical. The eight are:
Isaiah Andrews, Melissa Dell, Nathaniel Hendren, and Stefanie Stantcheva of Harvard
Parag Pathak and Heidi Williams of MIT
Emi Nakamura of UC Berkeley
Amir Sufi of Chicago Booth

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“Mounting Pressure on Central Banks,” finews.asia, 2018

December 27, 2018

Finews.asia, December 27, 2018. HTML.
Independence has increasingly come under pressure and this pressure will remain. What has been tried and tested for years is now questioned again.
Increasing demands on central banks reflect the failure of other state organs.

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McAndrews on Narrow Banking

December 16, 2018

At an AEI event in Washington, James McAndrews discussed narrow banking and the Federal Reserve’s opposition to McAndrews’ “The Narrow Bank USA Inc.”
His slides emphasize the fact that a narrow bank can help achieve goals that Federal Reserve representatives themselves promoted in the past.

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TIPS Goes Online

November 30, 2018

The ECB launches its Target Instant Payment Settlement (TIPS) system, which facilitates instant money transfers between banks and allows end users connected to those banks to make instant retail payments across the Euro zone.
Report in the FAZ. Last year’s report by Mehreen Khan in the FT.
From the ECB’s website:
TIPS was developed as an extension of TARGET2 and settles payments in central bank money. TIPS currently only settles payment transfers in euro. However, in case of demand other currencies could be supported as well. …
… a number of national solutions have been developed, or are under development, across the EU. A challenge for the Eurosystem is to ensure that these national solutions do not (re)introduce fragmentation … TIPS aims to minimise this risk by offering a service

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“Nicht-Wissen kann schützen (Knowing Less Protects),” FuW, 2018

November 26, 2018

Finanz und Wirtschaft, November 24, 2018. PDF. Ökonomenstimme, November 26, 2018. HTML.
European firms dealing with Iran face U.S. “secondary sanctions.”
European counter measures (including a blocking statute) prove toothless.
Even central banks in the European Union surrender to U.S. pressure, as does SWIFT.
Ignorance is bliss: For a sovereign, the best protection against foreign states pressuring to monitor domestic citizens and businesses may be to know as little as possible.

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Iran-Sanktionen: Europa in der Bredoullie

November 26, 2018

Im Konflikt mit dem Iran setzt die USA auf ‘sekundäre Massnahmen’, die sich gegen nicht-amerikanische natürliche und juristische Personen mit iranischen Kontakten richten. Seitens der EU zeichnet sich bisher kein effektiver Ansatz ab, wie europäische Unternehmen trotzdem weiterhin frei mit dem Iran handeln könnten. Eine Möglichkeit wäre eine staatliche Strategie des Nicht-Wissens.
Europäische Firmen
leiden unter der Verquickung amerikanischer Aussen- und Wirtschaftspolitik.
Dies wird in den letzten Wochen insbesondere vor dem Hintergrund der Ereignisse
im mittleren Osten deutlich. Siemens traf es im Oktober. Die Administration Trump
signalisierte, dass sie es nicht tolerieren werde, wenn der Irak beim Aufbau
seiner Energieversorgung hauptsächlich mit dem deutschen Konzern

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Justice and the German Public Debate

November 16, 2018

On German TV, stand-up comedian Dieter Nuhr exposes the contradictions of calls for justice and equality that characterize much of the German public debate. His hour-long performance could well serve as a lecture in economics and ethics.

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IMF’s Lagarde Open to CBDC

November 15, 2018

At a conference in Singapore, IMF Managing Director Christine Lagarde has argued that
[w]hile the case for digital currency is not universal, we should investigate it further, seriously, carefully and creatively.
In her speech she emphasizes potential benefits related to financial inclusion; security and consumer protection; and privacy. (Privacy would be limited however.) She sees risks as well, including to innovation. But she de-emphasizes the notion of increased run risk which commentators often stress.
What about the risk of bank runs? It exists. But consider that people run when they believe that cash withdraws are honored on a first-come-first-serve basis—the early bird gets the worm. Digital currency, instead, because it can be distributed much more easily than cash, could

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The e-Krona Project Progresses

November 13, 2018

The Riksbank has published the second e-krona project report (website). In a special issue of the Riksbank’s Economic Review, several authors discuss related issues.
I will participate in a Riksbank panel in early December to discuss CBDC and the e-krona project.

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Legal Commentary on U.S. Iran Sanctions and the EU’s Blocking Statute

November 9, 2018

Laurent Ruessmann and Jochen Beck, FieldFisher, 17 July 2018, International firms caught between US Iran sanctions and EU blocking statute.
Several authors, Gibson, Dunn & Crutcher LLP, 9 August 2018, The “New” Iran E.O. and the “New” EU Blocking Sanctions—Navigating the Divide for International Business.
The “primary sanctions” that limit U.S. companies and persons from engaging with Iran have on the whole never been lifted. The principal sanctions relief provided by the United States [until 2018] have been of “secondary sanctions” that focus on non-U.S. companies’ transactions with Iran. These measures are designed to force non-U.S. firms to choose to either engage with Iran or the United States. …
All of the sanctions and [the EU’s] counter-sanctions are in large part discretionary.

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“Reserves For All? …” on Several SSRN Top Ten Lists

November 8, 2018

My July 2018 CEPR working paper “Reserves For All? Central Bank Digital Currency, Deposits, and their (Non)-Equivalence” has made it on several SSRN top ten lists. PDF. (Personal copy.)
Abstract: I offer a macroeconomic perspective on the “Reserves for All” (RFA) proposal to let the general public use electronic central bank money. After distinguishing RFA from cryptocurrencies and relating the proposal to discussions about narrow banking and the abolition of cash I propose an equivalence result according to which a marginal substitution of outside for inside money does not affect macroeconomic outcomes. I identify key conditions on bank and government (central bank) incentives for equivalence and argue that these conditions likely are violated, implying that RFA would change

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SWIFT’s Response to the U.S. Iran Sanctions Threat

November 7, 2018

SWIFT, the international financial messaging system, has responded to the U.S. sanctions threat (see this post)—it has agreed to comply. Michael Peel reports in the FT, that SWIFT
suspends certain Iranian banks’ access to its cross border-payment network.
According to Peel, SWIFT explains the step as follows:
“This step, while regrettable, has been taken in the interest of the stability and integrity of the wider global financial system.”
This does not only expose SWIFT to punitive actions by the European Union since
… new EU rules … forbid companies from complying with the US Iran sanctions.
It also seems to contradict the explanations that SWIFT provides on its homepage:
[w]hilst sanctions are imposed independently in different jurisdictions around the world, SWIFT cannot arbitrarily

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U.S. Sanctions against Iranian Authorities and Other Persons

November 6, 2018

The Executive Order. And what it means, according to the Treasury Department’s FAQs page (my coloring):

E.O. 13846 reimposes relevant blocking sanctions, correspondent and payable-through account sanctions, and menu-based sanctions previously provided for in E.O.s 13574, 13590, 13622, and 13645, which were revoked by E.O. 13716, and continues in effect sanctions authorities provided for in E.O.s 13628 and 13716. As incorporated into E.O. 13846, these measures include implementing authority for and additional tools related to: the Iran Sanctions Act of 1996, as amended (ISA), the Comprehensive Iran Sanctions, Accountability and Divestment Act of 2010, as amended (CISADA), the Iran Threat Reduction and Syria Human Rights Act of 2012 (TRA), and the Iran Freedom Counter-Proliferation Act

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Truth, Triviality, and Contradiction

November 5, 2018

Nils Bohr chose
Contraria Sunt Complementa
as motto for his coat of arms. According to his son and others, Bohr distinguished between the logical properties of trivialities on the one hand and profound truths on the other:
The opposite of a correct statement is a false statement. But the opposite of a profound truth may well be another profound truth. [Unsourced]
There are two sorts of truth: Profound truths recognized by the fact that the opposite is also a profound truth, in contrast to trivialities where opposites are obviously absurd. [Quoted by Hans Bohr]
It is the hallmark of any deep truth that its negation is also a deep truth. [Quoted by Max Delbrück]

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Swiss-German Media Quality

October 30, 2018

Two recent articles critically reflect on the quality of journalism in German speaking news, specifically in Switzerland. In the NZZ, Stephan Russ-Mohl reports about a study according to which in Switzerland, only 42 professors out of a sample of 1100 are regularly interviewed; they provide about half of the publicized statements. (In total, there are about 5500 professors in Switzerland.)
Eine Vielfalt wissenschaftlicher Stimmen gibt es in der Medienarena nicht: Von den 1100 der rund 5500 Professoren in der Schweiz, welche die Zürcher Forscher in ihrer Stichprobe erfasst haben, sind es ganze 42, die regelmässig von den Medien als Experten befragt werden und rund 50 Prozent aller Statements bestreiten. Die drei meistzitierten Medienstars der Schweizer Forscher sind Michael Hengartner

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Conflicts of Interest at Bern’s Inselspital?

September 7, 2018

In the NZZ, Daniel Gerny and Simon Hehli report about potential conflicts of interest at Bern’s university hospital, the Inselspital.
A cardiologist found evidence of negative health effects of in vitro fertilization, which the Inselspital offers. But unusually, the hospital’s PR department didn’t advertize the findings. The motivation to keep quiet, according to the PR department, was that the findings are of relevance also for other groups at the hospital, and that this would have to be taken into account:
Publiziert wurde die Berner Studie im renommierten Fachmagazin «Journal of the American College of Cardiology». Seit Tagen sind die Untersuchungsergebnisse in aller Munde. … Umso erstaunlicher, dass ausgerechnet Scherrers Arbeitgeber, das Inselspital, der Studie keine grosse

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Negative Value Added of Switzerland’s Agricultural Sector

September 7, 2018

Farmers in Switzerland receive about CHF 2.7 billion in direct financial support annually. Total financial support by the federal and cantonal governments equals more than CHF 4 billion. But according to a report published by Zurich based think tank Avenir Suisse, this financial support constitutes just a minor part of the transfers from society at large to farmers, due to explicit and implicit subsidies, privileges, and—most importantly—negative externalities.
A list of privileges compiled by Avenir Suisse.
Avenir Suisse estimates the value added of Swiss agriculture to be hugely negative.
Die heutige Schweizer Landwirtschaft resultiert in einer negativen Wertschöpfung von minus 15,8 Mrd. Fr. pro Jahr. Damit kostet sie uns umgerechnet rund 1,8 Mio. Fr. pro Stunde.
In the NZZ, Nicole

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“Macroeconomics II,” Bern, Fall 2018

August 31, 2018

MA course at the University of Bern.
Time: Wed 10-12. KSL course site. Course assistant: Lukas Voellmy.
The course introduces Master students to modern macroeconomic theory. Building on the analysis of the consumption-saving trade off 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 possibly the Lucas tree model. Lectures follow chapters 1–4 (possibly 5) in this text.

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“Central Bank Digital Currency: Why It Matters and Why Not,” VoxEU, 2018

August 20, 2018

VoxEU, August 20, 2018. HTML.
To a first approximation, inside and outside money are substitutes—the introduction of CBDC does not change the equilibrium allocation.
Bank incentives and central bank incentives might be affected though.
CBDC could increase the incentive to extend credit but might undermine the political support for implicit financial assistance to banks.

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