Dirk Niepelt

My VoxEU column now also on finews and World News Monitor, September 17, 2019. Digital currencies involve tradeoffs. Libra resolves them less favorably than other projects, and less favorably than CBDC. When confronted with the choice between the status quo and a new financial architecture with CBDC, most central banks have responded cautiously. But Libra or its next best replica will take this choice off the table – the status quo ceases to be an option. The new choice for monetary...

On swissinfo.ch, Fabio Canetg explains how the Swiss National Bank prevents banks from hoarding cash rather than holding reserves at the central bank (which pay negative interest). He points to the following sentence in the SNB’s December 2014 press release (my emphasis) and he speculates that banks could, in principle, implement similar schemes to keep depositors from withdrawing cash: The threshold currently corresponds to 20 times the minimum reserve requirement for the reporting...

This is blog post #1000.

VoxEU, September 12, 2019. HTML. Digital currencies involve tradeoffs. Libra resolves them less favorably than other projects, and less favorably than CBDC. When confronted with the choice between the status quo and a new financial architecture with CBDC, most central banks have responded cautiously. But Libra or its next best replica will take this choice off the table – the status quo ceases to be an option. The new choice for monetary authorities and regulators will be one between...

Journal of Monetary Economics, with Markus Brunnermeier. PDF. When does a swap between private and public money leave the equilibrium allocation and price system unchanged? To answer this question, the paper sets up a generic model of money and liquidity which identifies sources of seignorage rents and liquidity bubbles. We derive sufficient conditions for equivalence and apply them in the context of the “Chicago Plan”, cryptocurrencies, the Indian de-monetization experiment, and Central...

MA course at the University of Bern. Time: Wed 10-12. KSL course site. Course assistant: Christian Wipf. The course introduces Master students to modern macroeconomic theory. Building on the analysis of the consumption-saving tradeoff 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...

Huw van Steenis’ summarizes his report as follows (my emphasis): A new economy is emerging driven by changes in technology, demographics and the environment. The UK is also undergoing several major transitions that finance has to respond to. What this means for finance Finance is likely to undergo intense change over the coming decade. The shift to digitally-enabled services and firms is already profound and appears to be accelerating. The shift from banks to market-based finance is...

The Federal Reserve Banks will develop a round-the-clock real-time payment and settlement service, FedNow. The objective is to support faster payments in the United States. From the FAQs (my emphasis): … there are some faster payment services offered by banks and fintech companies in the United States, their functionality can be limited. In particular, due to the lack of a universal infrastructure to conduct faster payments, most of these services rely on “closed-loop” approaches, meaning...

In his Nobel lecture (reprinted in the June issue of the American Economic Review), William Nordhaus concludes that we should focus on four goals: First, people around the world need to understand and accept … Those who understand the issue must speak up and debate contrarians who spread false and tendentious reasoning. … Second, nations must establish policies that raise the price of CO2 and other greenhouse-gas emissions. … Moreover, we need to ensure that actions are global and not...

Different aspects of the Libra proposal that various authors have emphasized: Jameson Lopp on OneZero: A “database of programmable resources;” Move; “[p]erhaps the network as a whole can switch to proof of stake, but in order for the stablecoin peg/basket to be maintained, some set of entities must keep a bridge open to the traditional financial system. This will be a persistent point of centralized control via the Libra Association”; not a blockchain, the “data structure of the ledger...