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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

Geldschöpfung “aus dem Nichts”

3 days ago

Auf der Ökonomenstimme läuft die Diskussion über das "Geld aus dem Nichts" bereits seit ein paar Monaten. Nicht zuletzt aufgrund der Vollgeldinitiative in der Schweiz wird nun auch ausserhalb von VWL-Kreisen verstärkt über die Geldschöpfung privater Geschäftsbanken diskutiert. Dieser Beitrag weist darauf hin, dass im Prinzip jedermann Geld schöpfen kann, dass das durch Banken geschöpfte Geld  jedoch (noch) besonderes Vertrauen geniesst, das im Zweifelsfall mit staatlicher Unterstützung gesichert werden muss.
Die Debatte um die
Vollgeldinitiative hat ein Thema in das Zentrum der öffentlichen Diskussion
gerückt, das bis vor kurzem neben wenigen Wissenschaftlern nur VWL-Studenten in
Einführungsvorlesungen beschäftigte: Die Geldschöpfung im Bankensystem.[ 1 ]
Weithin
bekannt ist,

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Romanticism in Germany

6 days ago

In The Guardian, Philip Oltermann speculates about a new romanticist era in Germany, exemplified by Simon Strauss’ “Sieben Nächte.”

Caspar David Friedrich: Winter Landscape, 1811.

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Real Interest Rates in the Long Run

9 days ago

On Bank Underground, Paul Schmelzing looks at real interest rates over the last 700 years and finds that
… the past 30-odd years more than hold their own in the ranks of historically significant rate depressions. But the trend fall seen over this period is a but a part of a much longer ”millennial trend”. It is thus unlikely that current dynamics can be fully rationalized in a “secular stagnation framework”.

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Tax Evasion and Tax Rates

9 days ago

High rates of tax evasion are not necessarily a consequence of high tax rates. In an NBER working paper, Annette Alstadsæter, Niels Johannesen, and Gabriel Zucman provide estimates of countries’ wealth holdings in “tax havens.” Based on BIS statistics the authors find that:
Wealth on the order of 10% of global GDP is held offshore.
In Scandinavia, the number is much smaller.
In continental Europe, it equals roughly 15%.
In some Gulf and Latin American countries, almost 60%.
In Russia, the richest citizens hold the majority of their wealth abroad.

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Neoliberalism—Narrow and Broad

11 days ago

In the Boston Review, Dani Rodrik discusses neoliberalism and argues that
mainstream economics shades too easily into ideology, constraining the choices that we appear to have and providing cookie-cutter solutions.
Rodrik emphasizes that sound economics implies context specific policy recommendations.
And therein lies the central conceit, and the fatal flaw, of neoliberalism: the belief that first-order economic principles map onto a unique set of policies, approximated by a Thatcher–Reagan-style agenda.
But he also stresses that the
principles [of economics] are not entirely content free. China, and indeed all countries that managed to develop rapidly, demonstrate their utility once they are properly adapted to local context. Conversely, too many economies have been driven to ruin

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Climate Science Special Report (and Tax Policy)

19 days ago

From About this Report:
[T]he U.S. Global Change Research Program (USGCRP) oversaw the production of this stand-alone report of the state of science relating to climate change and its physical impacts. …
The USGCRP is made up of 13 Federal departments and agencies that carry out research and support the Nation’s response to global change. The USGCRP is overseen by the Subcommittee on Global Change Research (SGCR) of the National Science and Technology Council’s Committee on Environment, Natural Resources, and Sustainability (CENRS), which in turn is overseen by the White House Office of Science and Technology Policy (OSTP). The agencies within USGCRP are the Department of Agriculture, the Department of Commerce (NOAA), the Department of Defense, the Department of Energy, the Department

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“Blockchain from a Central Bank Perspective”

20 days ago

An excellent conference organized by the Monetary Law Forum Switzerland focused on blockchain use cases from a central bank perspective. Program, links to slides.
I discussed the macroeconomic perspective and argued for “reserves for all.”
Some related links: Nivaura and Allen & Overy (backing Nivaura). OTC Swiss Blockchain, by Roman Bischoff.

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“Fiscal Federalism, Grants, and the U.S. Fiscal Transformation in the 1930s” UoCH, 2017

27 days ago

University of Copenhagen, Department of Economics Discussion Paper 17-18, July 2017, with Martin Gonzalez-Eiras. PDF.
We propose a theory of tax centralization and intergovernmental grants in politico-economic equilibrium. The cost of taxation differs across levels of government because voters internalize general equilibrium effects at the central but not at the local level. The equilibrium degree of tax centralization is determinate even if expenditure-related motives for centralization considered in the fiscal federalism literature are absent. If central and local spending are complements, intergovernmental grants are determinate as well. Our theory helps to explain the centralization of revenue, introduction of grants, and expansion of federal income taxation in the U.S. around the

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On Capital-Income Taxes and Wages

October 23, 2017

Greg Mankiw offers a simple example to establish that a reduction in the tax rate on capital income (in a closed economy) raises wages in the long run. John Cochrane patiently typed the solution. And Larry Summers argues on his blog that US realities are not well captured by Mankiw’s example.

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On 100%-Equity Financed Banks

October 23, 2017

On his blog, John Cochrane argues that banks could, and should be 100% equity financed. His points are:
(1) There are plenty of safe assets—government debt—out there and banks do not need to “create” additional safe assets—deposits.
I share this view partly. First, I don’t know what amount of safe assets are sufficient from a social point of view. Second, I don’t consider government debt to be a safe asset. Third, debt has safety and liquidity properties. The question is not only whether assets/liabilities provide sufficient safety but also whether they serve as means of payment in the same way that base money and deposits do. The key question then is: Do we need inside money? I don’t think that macroeconomics has a convincing answer to this question at this point. But I note that some

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Covered Interest Parity

October 11, 2017

On Alphaville, Matthew Klein points out that covered interest parity (dollar vs. yen) is alive and kicking again. It wasn’t during much of 2016. The Reserve Bank of Australia exploited the arbitrage opportunity.
Previous post on the topic, and another one.

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“Sovereign Bond Prices, Haircuts, and Maturity,” NBER, 2017

October 3, 2017

NBER Working Paper 23864, September 2017, with Tamon Asonuma and Romain Ranciere. PDF. (Local copy.)
Rejecting a common assumption in the sovereign debt literature, we document that creditor losses (“haircuts”) during sovereign restructuring episodes are asymmetric across debt instruments. We code a comprehensive dataset on instrument-specific haircuts for 28 debt restructurings with private creditors in 1999–2015 and find that haircuts on shorter-term debt are larger than those on debt of longer maturity. In a standard asset pricing model, we show that increasing short-run default risk in the run-up to a restructuring episode can explain the stylized fact. The data confirms the predicted relation between perceived default risk, bond prices, and haircuts by maturity.

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Arguments for Interest Paying, Account Based, CBDC

September 28, 2017

In an NBER working paper and a column on VoxEU, Michael Bordo and Andrew Levin make the case for central bank issued digital currency (CBDC).
Bordo and Levin favor an account-based CBDC system (managed or supervised by the central bank) rather than central bank issued tokens in the blockchain.
They emphasize the Friedman rule and the fact that interest paying CBDC affords the possibility to satisfy the rule:
These … goals – … a stable unit of account and an efficient medium of exchange – seemed to be irreconcilable due to the impracticalities of paying interest on paper currency, and hence Friedman advocated a steady deflation rather than price stability. But the achievement of both goals has now become feasible using a well-designed CBDC.
Interest paying CBDC would imply—payments to

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Utility Settlement Coin Skepticism

September 19, 2017

On Alphaville, Izabella Kaminska questions the utility settlement coin project (for an update on the project, see Martin Arnold’s recent FT article). She suspects that
USC isn’t really a blockchain project as much as a market infrastructure project — even if it leans on blockchain jargon for the purpose of gaining popular momentum. …
On paper, the technology promises to un-encumber cash collateral by creating a much more reliable form of distributed settlement, requiring a fraction of the collateral needed to operate a comparable centralised system.
She points to possible conflicts of interests. The project could just aim at convincing regulators that settlement processes are robust.
Hence most blockchain ventures today equate to nothing more than a lobbying effort by banks to get

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A Taxonomy of Money

September 19, 2017

In a BIS Quarterly Review article, Morten Bech and Rodney Garratt offer a taxonomy of money, with special emphasis given to central bank issued digital and crypto currency. They stress four dimensions:
issuer (central bank or other); form (electronic or physical); accessibility (universal or limited); and transfer mechanism (centralised or decentralised). The taxonomy defines a CBCC as an electronic form of central bank money that can be exchanged in a decentralised manner known as peer-to-peer, meaning that transactions occur directly between the payer and the payee without the need for a central intermediary. This distinguishes CBCCs from other existing forms of electronic central bank money, such as reserves, which are exchanged in a centralised fashion across accounts at the

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Should a Central Bank Issue Cryptocurrency?

September 19, 2017

On Alphaville, Izabella Kaminska asks why a central bank would want to issue cryptocurrency rather than conventional digital currency.
… if anonymity is not the objective of issuing a centrally supervised cryptocurrency, what really is the point of using blockchain or crypto technology? Just issue a conventional digital currency and be done with it. If, on the other hand, anonymity is the objective of issuing a centrally supervised cryptocurrency, how can this be justified by a central bank in light of years of regulatory policy focused on making sure cashflows are more easily tracked and monitored … The idea it should be the central bank unwinding this trend is utterly bizarre.
And:
… the only incentive central banks really have for introducing cryptocurrencies is in performing a

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The Midlife Crisis

September 19, 2017

On VoxEU, David Blanchflower and Andrew Oswald argue that it exists.
Overall, we think there is a great deal of evidence – though we have critics, especially among a small group of social psychologists – that humans experience a midlife psychological ‘low’. The midlife decline in wellbeing is apparently substantial and not minor … It should perhaps be emphasised that the midlife low is not affected by regression-equation controls for having young children, nor by changing the exact nature of the dependent variable.

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The Cost of Identity Theft

September 15, 2017

The Economist reports that according to estimates,
undoing identity fraud can take an average of six months and 100 to 200 hours of a person’s time.
In addition there is the risk of substantial financial losses due to identity fraud.
Suppose a data breach exposes personal information of 1 million people. As a consequence, 0.1% of the affected persons suffer financial costs of $100 each, and all affected persons spend 100 hours to undo the damage. Suppose the average wage of the affected population is $15 per hour. The data breach then costs $100’000 + $1’500’000’000, of which the latter component is a pure social loss.
Why do we move in the direction of more and more centralized data storage? Why do customers accept this? Why do some institutions, including “virtual” companies and

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ICOs and Frequent Flyer Miles

September 15, 2017

The Economist on “initial coin offerings:”
Many ICOs are designed to finance applications that will make use of the blockchain … In some cases, the “coins” can be exchanged for services on the site. In a way, this is like selling air miles in a startup airline; investors can either use the miles for flights or hope they can trade them at a profit. For the business, it is also a way of creating demand for the product they are selling.
But in plenty of cases, an ICO is just a way of raising capital without all the hassle of meeting regulatory requirements, or the burden of paying interest to a bank.

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Desirable Features of Central Bank Issued Digital Currency

September 13, 2017

On bankunderground, Simon Scorer reminds us that a central bank issued digital currency (CBDC) need not operate on a distributed ledger platform. The two do not have much to do with each other.
Scorer suggests a series of technical requirements for a CBDC:

And he concludes that a distributed ledger does not meet all requirements.
It’s unlikely that all of the above attributes could be perfectly met with today’s technology; you may need to make compromises between features – e.g. the trade-off between resilience and privacy …
CBDC is far from just a simple question of technology; any central bank contemplating CBDC will need to answer a host of fundamental economic questions, as well as considering how feasible it is to achieve all the required features and what type of technology

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US Top Income Shares Rose Less Dramatically

September 13, 2017

That’s what Gerald Auten and David Splinter argue in a paper from last year.
… new estimates of top income shares using two consistent measures of income. Our measure of consistent market income includes full corporate profits and adjusts for changes from TRA86, including changes to the tax base and increased filing by dependent filers. In addition, we include employer paid payroll taxes and health insurance and adjust for falling marriage rates. The effect of these adjustments on estimated top income shares are dramatic. Using a consistent measure of market income shows that the increase in income shares of the top one percent since 1979 is about half of the PS unadjusted estimate. The increase since 1960 is about one-quarter of the unadjusted estimate. Moreover, our measure of broad

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The Lifespan of Constitutions

September 12, 2017

The comparative constitution’s project shows timelines of the world’s constitutions. Japan’s constitution appears as one of the most stable ones, Switzerland’s doesn’t.

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Distributed-Ledger Based Payment Systems Could Work

September 12, 2017

The ECB has published a first report on Stella, a joint research project with the Bank of Japan. The two banks are interested in potential roles that distributed ledger technology could play to support the financial market infrastructure. The report assesses whether existing payments systems could be safely and efficiently run on a distributed ledger. It concludes that
a distributed-ledger-based system could meet the performance needs of real-time gross settlement systems, up to some limits;
such a system could strengthen resilience.

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