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.

Negative Zinsen machen Staatsschulden nicht
«kostenlos». Den Emittenten wird kein «Geld geschenkt». Selbst wenn der
Zinssatz unterhalb der Wachstumsrate liegt, bedeutet dies nicht, dass
nachhaltige und insbesondere optimale Schuldenquoten ins Grenzenlose steigen.
Nominal- und
Realzinsen sind tief und in vielen Ländern sogar negativ. Deshalb ist vielfach zu
lesen, Staatsschulden seien «kostenlos» oder «nahezu kostenlos». Stimmt das?
Bruttozinsen
Auf den ersten Blick stimmt
es nicht, denn der Käufer einer Bundesobligation muss für deren Erwerb etwas
bezahlen. Alles andere wäre erstaunlich. Schliesslich dient das Geschäft
zwischen Schuldner und Gläubiger dazu, Kaufkraft in der Zukunft und der
Gegenwart zu tauschen. Der Preis, zu dem dieser Tausch stattfindet, ist der
Bruttozins,

The Federal Department of Finance and the SNB have agreed on a new scheme for the distribution of SNB profits. Agreement for the period 2020-2025, Explanations. Some comments in German (also available as PDF):
Profitieren Bund und Kantone finanziell von den höheren SNB-Ausschüttungen?
Höhere Gewinnausschüttungen in der Gegenwart bedingen tiefere in der Zukunft.
In erster Näherung bleibt das Nettovermögen von Bund und Kantonen unverändert, denn es berücksichtigt auch den Wert der zukünftigen Ansprüche gegenüber der SNB.
Siehe z.B. „Die Volkswirtschaft“ 8-9 2020, HTML.
Warum dann die positiven Reaktionen bei Vertretern von Bund und Kantonen?
Politiker/Wähler orientieren sich an den ausgewiesenen Schulden des Staates. Höhere Ausschüttungen ermöglichen eine tiefere Schuldenaufnahme. Daher

Goodreads rating 3.76. An inquiry into language and personal experience.
Bieri analyzes notions of free will, their basis or vacuousness, and their consequences. A powerful dissection of language and experience.
Wille ist bedingt durch Historie.
Ein unbedingt freier Wille wäre nicht der Wille der Person; er wäre unberechenbar und zufällig — nicht das, nach dem sich Verfechter eines unbedingt freien Willens sehnen. Freier und unfreier Wille sind bedingt.
Bedingt freier Wille hat nichts mit Zwang oder Ohnmacht zu tun, denn die Beweggründe liegen nicht aussen; die Person entscheidet.
Bedingt freier Wille rechtfertigt daher auch nicht Fatalismus. Nicht Vorherbestimmtheit ist ein Übel, sondern allenfalls das, was vorherbestimmt ist.
Verantwortung, Strafe und Moral? “In moralischen Dingen

Panel with Elga Bartsch, Agnès Bénassy-Quéré, Giancarlo Corsetti, Olivier Garnier, and Charles Wyplosz. Moderated by Tobias Broer.
Elga Bartsch, Agnès Bénassy-Quéré, Giancarlo Corsetti, Xavier Debrun: Geneva Report 23 | It’s All in the Mix: How Monetary and Fiscal policies Can Work or Fail Together.
Event at PSE.
My comments on the report.

NZZ, February 1, 2021. PDF. (Title changed by NZZ.)
Do negative interest rates render government debt costless? No. What about r

Goodreads rating 4.55. Surprising, sympathetic.

On bankunderground, Michael Kumhof, Phurichai Rungcharoenkitkul, and Andrej Sokol question that foreign savings is an important driver of US current account deficits:
Consider how US imports can be paid for in the real world: first, by transferring existing domestic or foreign bank balances to foreigners, which involves no new financing. Second, by borrowing from domestic banks and transferring the resulting bank balances to foreign households, which involves domestic but not foreign financing. And finally, by borrowing from foreign banks and transferring the resulting bank balances to foreign households. Only the last option involves foreign financing, but in practice it is the least likely option for most domestic residents.
Gross balance sheet positions are critical to discern

VoxEU, January 11, 2021, with Martin Gonzalez-Eiras. HTML.
Based on the CEPR discussion paper, we draw conclusions for the pandemic endgame. We explain why Israel will likely impose a harsher lockdown than other countries, especially poor ones. And why we should expect “inverse lockdowns”—measures to stimulate social interaction.

Some modest new year’s resolutions inspired by the commencement speech of US Navy Admiral William H. McRave.

Goodreads rating 4.39. Concise, to the point, insightful.

Goodreads rating 4.11. Tranquility.

Goodreads rating 4.17. Stronger on relativity than on quantum mechanics and thermodynamics.

Olivier Blanchard, Public Debt and Low Interest Rates, AER 2019, 109(4).
Robert Barro, r Minus g, NBER wp 28002, October 2020.
Dmitriy Sergeyev and Neil Mehrotra, Debt Sustainability in a Low Interest World, CEPR dp 15282, September 2020.
Stan Olijslagers, Nander de Vette, and Sweder van Wijnbergen, Debt Sustainability when r−g

Writing about CBDC, John Cochrane makes it clear that he is in favor. He links to my work and writes
Dirk Niepelt has written a lot about CBDC theory, including reserves for all in 2015, a recent Vox-EU summary and papers,  here with Markus Brunnermeier a JME paper “CBDC coupled with central bank pass-through funding need not imply a credit crunch nor undermine financial stability,” a follow up including “The model implies annual implicit subsidies to U.S. banks of up to 0.8 percent of GDP during the period 1999-2017.”  Here  “reserves for all” “does not affect macroeconomic outcomes,”

On Fazit, Gerald Braunberger reviews the concept of “liquidity trap.”
Keynes never used the term but Robertson did.
Hicks introduced the common notion (represented, e.g., by a flat LM curve).
Krugman talks about a different trap. So does Blanchard and he (incorrectly) attributes it to Keynes. So does Sinn.

Alberto Bisin (Journal of Economic Literature, December 2020) reviews Stephanie Kelton’s “The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy:”
Never is its logical structure expressed in a direct, clear way, from head to toe. … Some of these statements are literally correct but used for incorrect or misleading implications—plays on words, effectively. They seem taken directly from the book of tricks of the Greek sophists (the ones Aristophanes makes fun of).
John Cochrane (blog post, July 2020) reviews the same book:
Skeptics have called it “magical monetary theory.” They’re right.
Dirk Niepelt (blog post/Neue Zürcher Zeitung (in German), April 2019):
The Macroeconomic Perpetuum Mobile.

Discussion at the 2020 Bank of Canada Annual Economic Conference: The Future of Money and Payments: Implications for Central Banking. PDF.

Dirk Niepelt ist der Direktor des Studienzentrums Gerzensee und Professor für Makroökonomie an der Universität Bern. Hier im Gespräch mit Geldcast-Host Fabio Canetg. swissinfo.ch
Swissinfo, December 14, 2020. HTML, podcast.
We talk about CBDC, the Swiss National Bank, whether CBDC would render it easier to implement helicopter drops, and how central bank profits should be distributed.

Dirk Niepelt ist weltweit einer der führenden Forscher auf dem Gebiet der elektronischen Zentralbankengelder. Fabio Canetg traf ihn zum Geldcast.
“Bis vor wenigen Jahren wurde das elektronische Zentralbankengeld von den Notenbanken noch sehr skeptisch beurteilt”, sagt Dirk Niepelt. Das sei heute aber nicht mehr so. Denn: “Der Weg geht ganz klar in Richtung digitale Währungen.” Der

Swissinfo, December 14, 2020. HTML, podcast.
We talk about CBDC, the Swiss National Bank, whether CBDC would render it easier to implement helicopter drops, and how central bank profits should be distributed.

CEPR Discussion Paper 15541, December 2020, with Martin Gonzalez-Eiras. PDF (local copy).
We propose a flexible model of infectious dynamics with a single endogenous state variable and economic choices. We characterize equilibrium, optimal outcomes, static and dynamic externalities, and prove the following: (i) A lockdown generically is followed by policies to stimulate activity. (ii) Re-infection risk lowers the activity level chosen by the government early on and, for small static externalities, implies too cautious equilibrium steady-state activity. (iii) When a cure arrives deterministically, optimal policy is dis-continous, featuring a light/strict lockdown when the arrival date exceeds/falls short of a specific value. Calibrated to the ongoing COVID-19 pandemic the baseline

Finanz und Wirtschaft, December 9, 2020. PDF.
Economic policy is not about GDP growth. It’s about welfare.
Externalities are key. Infection externalities don’t go away by calling for responsible behavior. Infection externalities can turn positive.
Keeping worthy companies or networks alive does not require government intervention, unless capital markets don’t work.
To judge the right amount of burden sharing is beyond economics. But economics gives some clues: In an ideal world, idiosyncratic risk exposure would be insured while in second best, taxes and subsidies achieve only part of that. The data show that trade-offs between public health and economic activity are less severe than sometimes argued.

The Economist discusses the risk of CBDC-induced bank disintermediation. Their summary of the 2019 paper by Markus Brunnermeier and myself:
If people prefer CBDCS, however, the central bank could in effect pass their funds on to banks by lending to them at its policy interest rate. “The issuance of CBDC would simply render the central bank’s implicit lender-of-last-resort guarantee explicit,” wrote Markus Brunnermeier of Princeton University and Dirk Niepelt of Study Centre Gerzensee in a paper in 2019. Explicit and, perhaps, in constant use.

SUERF Webinar “CBDC: State of play, practical challenges, open issues” with Ulrich Bindseil (ECB) and Morten Bech (BIS). Moderated by Dirk Niepelt. December 4, 2020, 2 pm.

Webinar website.
Presentation by Morten Bech.
Presentation by Ulrich Bindseil.
CBDC = MM0GA.

CEPR Discussion Paper 15457, November 2020. PDF (local copy).
We analyze policy in a two-tiered monetary system. Noncompetitive banks issue deposits while the central bank issues reserves and a retail CBDC. Monies differ with respect to operating costs and liquidity. We map the framework into a baseline business cycle model with “pseudo wedges” and derive optimal policy rules: Spreads satisfy modified Friedman rules and deposits must be taxed or subsidized. We generalize the Brunnermeier and Niepelt (2019) result on the macro irrelevance of CBDC but show that a deposit based payment system requires higher taxes. The model implies annual implicit subsidies to U.S. banks of up to 0.8 percent of GDP during the period 1999-2017.

K. Kıvanç Karaman, ¸Sevket Pamuk, Seçil Yıldırım-Karaman (2020), Money and monetary stability in Europe, 1300–1914, Journal of Monetary Economics (115).

At one extreme, the Dutch Republic depreciated its monetary unit by about 2.3 times, at the other, the Ottomans depreciated by about 25,000 times. These two numbers correspond to average annual depreciation rates of 0.2 and 2.5% respectively, with the other states falling in-between. … depreciations tended to be episodic. In particular, long periods of constant silver and gold value alternated with episodes of rapid depreciation in consecutive years. … There were also instances of one-off depreciations, but they were few, and at low rates. … monetary stability was not an elusive objective. Some states stabilized their monetary unit

Recent indications:
BIS: Central banks and BIS publish first central bank digital currency (CBDC) report laying out key requirements (9 October 2020)
ECB: A Digital Euro (updated regularly)
Bank of Russia: Bank of Russia announces public discussions on digital ruble (13 October 2020)
Related recent developments:
Digital Dollar Project: The Digital Dollar Project Publishes Nine Pilot Scenarios to Test Elements of a US CBDC (October 2020)
Monetative e.V.: Digitales Zentralbankgeld aus Sicht der Zivilgesellschaft (June 2020)

A Fine Theorem offers a very nice description of their work.