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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

Financial Innovation, Central Banks, CBDC

15 days ago

In its annual economic report, the BIS further warms to the idea that CBDC is a key part of central banks’ response to financial innovation.
Central banks play a pivotal role in maintaining the safety and integrity of the payment system. They provide the solid foundation by acting as guardians of the stability of money and payments. The pandemic and resulting strain on economic activity around the world have confirmed the importance of central banks in payments.
Digital innovation is radically reshaping the provision of payment services. Central banks are embracing this innovation. They promote interoperability, support competition and innovation, and operate public infrastructures – all essential for easily accessible, low-cost and high-quality payment services.
Central banks, as

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Money and Memory

18 days ago

On Alphaville, Claire Jones and Izabella Kaminska discuss privacy issues related to CBDC. In the background, Kocherlakota’s “Money is Memory” is lurking.

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“Macroeconomic Analysis,” VoxEU, 2020

21 days ago

VoxEU, June 22, 2020. HTML.
Is macroeconomics useful? Of course. To make the point, academics must regain the interpretative high ground from market commentators. While it helps when policymakers understand fundamental macroeconomic concepts, it is equally important for the general public to grasp them. More, and how this relates to the new textbook, on VoxEU.

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Robert Pirsig’s “Zen and the Art of Motorcycle Maintenance: An Inquiry Into Values”

22 days ago

Quality, not subject or object, as the elementary fabric. ἀρετή. A rehabilitation of the sophists.
Some quotes:
If the purpose of scientific method is to select from among a multitude of hypotheses, and if the number of hypotheses grows faster than experimental method can handle, then it is clear that all hypotheses can never be tested. If all hypotheses cannot be tested, then the results of any experiment are inconclusive and the entire scientific method falls short of its goal of establishing proven knowledge. …
God, I don’t want to have any more enthusiasm for big programs full of social planning for big masses of people that leave individual Quality out. These can be left alone for a while. There’s a place for them but they’ve got to be built on a foundation of Quality within the

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“Digital Money, Payments and Banks,” CEPR/IESE Report, 2020

25 days ago

Discussion of Antonio Fatás’ chapter in Elena Carletti, Stijn Claessens, Antonio Fatás, Xavier Vives, The Bank Business Model in the Post-Covid-19 World, CEPR/IESE report, London, June 2020. PDF.
Antonio’s chapter offers a rich overview of the dramatic changes in the world of money and banking that we have seen in recent years. I focus on two themes: the nature of money and how it relates to these developments, and the government’s response to the structural changes we observe.
I discuss the price of money, its fundamental value, store-of-value bubble, and liquidity bubble components; the opaque legal tender concept and the absurd situation that governments outlaw the use of government money (contrary to what some theories would imply); the role of trust in a world without cash; and

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Covid-19 Superspreading Events Database

27 days ago

By Koen Swinkels, on Medium, a database and preliminary interpretation subject to various caveats. The preliminary suggested interpretation is as follows:

Nearly all SSEs in the database — more than 97% — took place indoors
The great majority of SSEs happened during flu season in that location
The vast majority took place in settings where people were essentially confined together, indoors, for a prolonged period (for example, nursing homes, prisons, cruise ships, worker housing)
Processing plants where temperatures are kept very low (especially meat processing plants) seem particularly vulnerable to SSEs

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“The Cancel Culture Twitter Mob Comes to Economics”

28 days ago

On his blog, John Cochrane comments on Harald Uhlig’s tweets and the reaction by Janet Yellen (AEA), other established economists, the Chicago Fed, and the JPE.
In the comments, one person provides additional information and another links to the list of signatories.

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“Reserves For All? Central Bank Digital Currency, Deposits, and their (Non)-Equivalence,” IJCB, 2020

June 4, 2020

International Journal of Central Banking. PDF.

This paper offers a macroeconomic perspective on the “Reserves for All” (RFA) proposal to let the general public hold electronic central bank money and transact with it. I propose an equivalence result according to which a marginal substitution of outside money (e.g., RFA) for inside money (e.g., deposits) does not affect macroeconomic outcomes. I identify key conditions for equivalence and argue that these conditions likely are violated, implying that RFA would change macroeconomic outcomes. I also relate the analysis to common arguments found in discussions on RFA and point to inconsistencies and open questions.

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“Wenn die Notenbank den Staat finanziert (When the Central Bank Finances the State),” FAS, 2020

June 2, 2020

FAS, 31 May 2020. PDF.
Monetary deficit financing is the norm—after all, central banks distribute their profits. Monetary financing occurs in the context of regular open market operations and QE and, hyper charged, with helicopter drops. The question is not whether monetary policy should finance the government, but why it does so, and to what extent. Fiscal and monetary policy are inherently connected; what constitutes monetary policy is defined by objectives.

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Central Banks Zoom In on CBDC
According to a BIS press release, several leading central banks collaborate with the BIS on matters relating to the introduction of CBDC: The Bank of Canada, the Bank of England, the Bank of Japan,

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“Wenn die Notenbank den Staat finanziert (When the Central Bank Finances the State),” FAS, 2020

June 1, 2020

FAS, 31 May 2020. PDF.
Monetary deficit financing is the norm—after all, central banks distribute their profits. Monetary financing occurs in the context of regular open market operations and QE and, hyper charged, with helicopter drops. The question is not whether monetary policy should finance the government, but why it does so, and to what extent. Fiscal and monetary policy are inherently connected; what constitutes monetary policy is defined by objectives.

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“Tractable Epidemiological Models for Economic Analysis,” CEPR, 2020

May 21, 2020

CEPR Discussion Paper 14791, May 2020, with Martin Gonzalez-Eiras. PDF (local copy).
We contrast the canonical epidemiological SIR model due to Kermack and McKendrick (1927) with more tractable alternatives that offer similar degrees of “realism” and flexibility. We provide results connecting the different models which can be exploited for calibration purposes. We use the expected spread of COVID-19 in the United States to exemplify our results.

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Debt Monetization

May 14, 2020

On VoxEU, Refet Gürkaynak and Deborah Lucas argue in favor of helicopter drops to finance the fiscal burden due to Covid-19 and they propose an elegant way to implement such drops without undermining the central bank’s equity position (if regulators accept accounting tricks).
The special issue bonds would be zero coupon perpetuities and therefore would not obligate Treasury to any future payments. The legislation would require the Fed to buy these bonds from the banks at par. The bonds would then remain on the Fed’s balance sheet indefinitely. This monetises the special issue bonds.

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Censorship Resistant Payment Technologies

May 11, 2020

On Coin Center’s blog, Matthew Green and Peter van Valkenburgh write:
Censorship resistance is the only way to guarantee that a digital asset truly is “bearer” and can be sent directly from one person to another without reliance on a third party. Cryptocurrencies achieve this property by making network participants (miners) compete for the power to add transactions to the ledger. Even if some miners wish to censor a transaction, we assume that others will not, particularly if it means they are forgoing fee revenue. A centralized digital dollar would not have competitive mining but if the role of the ledger-keeper was reduced to verifying zero-knowledge proofs then any refusal to perform that verification risks indiscriminately censoring users throughout the economy. If the Treasury

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China’s Digital Renminbi

April 23, 2020

In the NZZ, Matthias Müller reports how China’s CBDC plans progress:
In China beginnen nun im Viertel Xiangcheng, das zu der unweit von Schanghai gelegenen Millionenstadt Suzhou gehört, in einem geschlossenen System erste Tests. …
Die PBoC dürfte ein zweistufiges System entwickelt haben. Auf der ersten Ebene wird die digitale Währung an die Geschäftsbanken ausgegeben. Auf der zweiten Ebene können dann die Haushalte und Unternehmen den digitalen Yuan abheben und verwenden. …
In Suzhou werden im April in einem ersten Schritt die digitalen Geldbeutel auf die Smartphones ausgewählter Testpersonen aufgespielt, wobei es sich um Angehörige des öffentlichen Diensts handelt.

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“On the Optimal ‘Lockdown’ during an Epidemic,” CovEc, 2020

April 20, 2020

Covid Economics, April 2020, with Martin Gonzalez-Eiras. PDF.
We embed a lockdown choice in a simplified epidemiological model and derive formulas for the optimal lockdown intensity and duration. The optimal policy reflects the rate of time preference, epidemiological factors, the hazard rate of vaccine discovery, learning effects in the health care sector, and the severity of output losses due to a lockdown. In our baseline specification a Covid-19 shock as currently experienced by the US optimally triggers a reduction in economic activity by two thirds, for about 50 days, or approximately 9.5 percent of annual GDP.

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Virtual Seminars

April 19, 2020

IDEAS/RePEc’s Economics Virtual Seminar Calendar aggregates information. Some selected seminar series:
Virtual macro seminar
Princeton BCF
HELP!
Global virtual seminar series on FinTech
Virtual digital economy seminar

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Libra 2.0

April 18, 2020

What’s left? The new plans envision
Several stablecoins tied to existing fiat currencies rather than (or in addition to) to the originally planned currency basket.
No more “permissionless” transactions, no more “censorship resistance.”
Vetting of new wallets by the operator (KYC, AML).
The new Libra White Paper.
Teunis Brosens and Carlo Cozucco in ING’s THINK.
Kiran Stacey and Hannah Murphy in the FT.
Philip Sandner and Jonas Gross in Medium.

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Whatever it Takes, Again?

April 16, 2020

Promising to do “whatever it takes” in order to avert a bad equilibrium is very different from printing money when the problem is a lack of resources, or their distribution.
See Gilles Saint-Paul’s “Whatever it Takes.”

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“On the Optimal ‘Lockdown’ during an Epidemic,” CEPR, 2020

April 14, 2020

CEPR Discussion Paper 14612, April 2020, with Martin Gonzalez-Eiras. PDF (local copy).
We embed a lockdown choice in a simplified epidemiological model and derive formulas for the optimal lockdown intensity and duration. The optimal policy reflects the rate of time preference, epidemiological factors, the hazard rate of vaccine discovery, learning effects in the health care sector, and the severity of output losses due to a lockdown. In our baseline specification a Covid-19 shock as currently experienced by the US optimally triggers a reduction in economic activity by two thirds, for about 50 days, or approximately 9.5 percent of annual GDP.

Read More »

“On the Optimal ‘Lockdown’ during an Epidemic,” CEPR, 2020

April 14, 2020

CEPR Discussion Paper 14612, April 2020, with Martin Gonzalez-Eiras. PDF (local copy).
We embed a lockdown choice in a simplified epidemiological model and derive formulas for the optimal lockdown intensity and duration. The optimal policy reflects the rate of time preference, epidemiological factors, the hazard rate of vaccine discovery, learning effects in the health care sector, and the severity of output losses due to a lockdown. In our baseline specification a Covid-19 shock as currently experienced by the US optimally triggers a reduction in economic activity by two thirds, for about 50 days, or approximately 9.5 percent of annual GDP.

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Medical Specialist Condemns Swiss Covid-19 Preparations and Response

April 11, 2020

In Die Mittelländische Zeitung, a Swiss doctor criticizes Switzerland’s preparations and response to Covid-19. He points to
Lack of preparation by political decision makers
Misleading communication by federal health officials
Their apparent lack of awareness of academic work on the topic
Arrogance in Switzerland and the West vis-à-vis China and other far eastern countries
Sensationalist scare mongering in the media
Calls for systematic infection of groups that are less at risk
Informative as far as medical aspects are concerned. Not convincing when criticizing statistical approaches to grasping the problem. Questionable as far as ex-post validation of eight studies and calls for action are concerned.

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Deaths Per Capita versus Confirmed Cases Per Capita

April 8, 2020

Data from April 6, 2020.
Iceland and Luxembourg have many more confirmed cases per capita than other countries (either because they have more cases or better information). Mortality per confirmed case is highest in Italy, Spain, France, Belgium, Netherlands, UK.
Source: Author’s calculations based on Johns Hopkins data and World Bank data.

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“Wirtschaftspolitik angesichts von Covid-19: Lastenteilung, aber keine Preismanipulationen (Economic Policy Responses to Covid-19: Burden Sharing, But no Price Distortions),” ÖS, 2020

April 3, 2020

Ökonomenstimme, 3 April 2020. HTML. Shorter version published in NZZ.
The aggregate Covid-19 shock calls for transfers of the type a pandemic insurance would have brought about. But we must not distort relative prices. They have to reflect scarcity, to provide incentives to overcome it. (This applies within countries but also across.)

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Wirtschaftspolitik angesichts von Covid-19: Lastenteilung, aber keine Preismanipulationen

April 3, 2020

Die Massnahmen zur
Krisenbewältigung sollten Lasten verteilen, ohne Preise zu verzerren. Die
Schweiz hat dazu die nötigen Mittel.
Der Bundesrat hat mit
einer breiten Palette von Massnahmen auf die wirtschaftlichen Verwerfungen
reagiert, die Covid-19 und die Eingriffe zum Schutz der öffentlichen Gesundheit
verursachen. Es ist absehbar, dass es nicht bei diesen Massnahmen bleiben wird.
So dürften zum Beispiel die zinsfreien und mit Bundesgarantie versehenen Darlehen,
die Banken nun gewähren, in Zukunft gestundet oder gar teilweise erlassen
werden.
Dagegen ist
grundsätzlich nichts einzuwenden. Der massive wirtschaftliche Einbruch erfordert
neben Sozialversicherungsleistungen für unterbeschäftigte ArbeitnehmerInnen auch
Transfers — nicht nur Darlehen —
an besonders betroffene

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