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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

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

2 days ago

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

3 days ago

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

14 days ago

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

21 days ago

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

23 days ago

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.

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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.

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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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Switzerland Peps Up SMEs

March 28, 2020

How Switzerland peps up SMEs: Banks are encouraged to extend credit (at 0%). The treasury guarantees the loans. The SNB refinances banks and accepts the guaranteed loans as collateral. Fast and efficient. Eventually, some of these loans will turn into grants of course. But that’s ok; the first-best response to a shock with asymmetric effects does involve transfers if markets are incomplete.

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BIS Innovation Hub Centre in Switzerland
From the SNB’s press release regarding the newly established BIS Innovation Hub Centre in Switzerland: The Swiss Centre will initially conduct research on two projects. The first of these will examine the integration of digital central bank money into a

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Switzerland Peps Up SMEs

March 26, 2020

How Switzerland peps up SMEs: Banks are encouraged to extend credit (at 0%). The treasury guarantees the loans. The SNB refinances banks and accepts the guaranteed loans as collateral. Fast and efficient. Eventually, some of these loans will turn into grants of course. But that’s ok; the first-best response to a shock with asymmetric effects does involve transfers if markets are incomplete.

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Data and Research on the Coronavirus

March 26, 2020

The first of a long sequence of nice papers on the virus by economists are out:
Martin Eichenbaum, Sergio Rebelo, and Mathias Trabandt (2020), The Macroeconomics of Epidemics. NBER wp 26882. (My comments on Twitter.)
James Stock (2020), Coronavirus Data Gaps and the Policy Response to the Novel Corona Virus. Mimeo. Conclusion: There is an urgent need to reliably estimate the asymptomatic rate—the share among the infected who do not show strong symptoms.
Data:
Unconditional mortality rates in Europe: EuroMOMO.
Case numbers: CSSE @ Johns Hopkins.
Cases numbers: Robert Koch Institute.
Case numbers: European Centre for Disease Prevention and Control.
Case numbers: ncov2019.live.
Oxford University’s government response tracker.
Coronavirus link database.
Blog by Klaus Wälde on case numbers

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Coronavirus: The Hammer and the Dance

March 20, 2020

An excellent article written by Tomas Pueyo and published on Medium.
Summary of the article: Strong coronavirus measures today should only last a few weeks, there shouldn’t be a big peak of infections afterwards, and it can all be done for a reasonable cost to society, saving millions of lives along the way. If we don’t take these measures, tens of millions will be infected, many will die, along with anybody else that requires intensive care, because the healthcare system will have collapsed.
… Here’s what we’re going to cover today, again with lots of charts, data and models with plenty of sources:
What’s the current situation?
What options do we have?
What’s the one thing that matters now: Time
What does a good coronavirus strategy look like?
How should we think about the economic

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Marshall Islands CBDC

March 3, 2020

The Marshall Islands CBDC project moves forward. Algorand, the project partner, reports that
blockchain for the world’s first national digital currency, the Marshallese sovereign (SOV), will be built using Algorand technology. The SOV will circulate alongside the US dollar and help the Marshall Islands efficiently operate in the global economy.

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Coronavirus: Effects on Course Program in Gerzensee

March 3, 2020

The Central Bankers Course ”Monetary Policy, Exchange Rates, and Capital Flows” has been postponed to 2021.
Doctoral courses currently take place as usual, subject to the following restrictions:
Participants are not allowed to attend Study Center Gerzensee events nor enter the Center’s premises for 14 days after returning from areas where the Coronavirus has spread. As of 2 March 2020, these areas are China, South Korea, Singapore, Iran, and Northern Italy defined as Tuscany, Emilia-Romagna and all other Italian regions further north.
Participants with symptoms of any mild or severe sickness are not allowed to attend Study Center Gerzensee events nor to check in at the Study Center.
Participants who experience symptoms after check in must stay in their hotel room and wait for

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On the Future of Payments and Settlement

March 3, 2020

In its Quarterly Review, the BIS offers nice perspectives on the future of payments. Morten Bech and Jenny Hancock survey innovations in payments, and where the problems lie. Tara Rice, Goetz von Peter and Codruta Boar examine the fall in the number of correspondent banks. Morten Bech, Umar Faruqui and Takeshi Shirakami discuss cross border payments. Morten Bech, Jenny Hancock, Tara Rice and Amber Wadsworth discuss securities settlement. And Raphael Auer and Rainer Böhme explore design choices of a retail CBDC.

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e-krona Pilot

February 20, 2020

The Riksbank starts a pilot project with Accenture to develop a technical solution for a retail e-krona.
Users shall be able to hold e-kronor in a digital wallet, make payments, deposits and withdrawals via a mobile app. The user shall also be able to make payments via wearables, such as smart watches, and cards.
The pilot runs for a year, on a distributed ledger, according to the Riksbank’s press release. More detailed information is contained in this note.

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