Dirk Niepelt

Jusletter, 1 July 2019, with Corinne Zellweger-Gutknecht. PDF. Libra is supposed to be backed; the returns on the securities backing it are going to be distributed among the Libra partners; and Libra’s price is supposed to be managed by a network of market makers. We don’t know much more. Will market makers have the incentive to deliver?

Finanz und Wirtschaft, June 29, 2019. PDF. It is not central bank digital currency (CBDC) per se which might act as a game changer in financial markets. What will be key is how central banks accommodate the introduction of CBDC. In principle, this accommodation can go very far, to the point where the introduction of CBDC does not affect macroeconomic outcomes. But such complete accommodation is unlikely. On the one hand, central banks will want to exploit the new monetary policy options...

In the FT, Chris Giles, Caroline Binham, and Delphine Strauss report about plans of the Bank of England to let fintech companies bank at Threadneedle Street and thereby offer payments systems on a level playing field with commercial banks. The editorial board of the FT welcomes the plans; it seems to have in mind not only competition but also “synthetic” CBDC: By offering fintech companies access to the BoE’s vaults, the governor may inject much-needed competition into the sector. What...

The Study Center’s hotel has been awarded the Swiss Location Award for the number one seminar location in Switzerland.

In the FT, Hannah Murphy reports about Facebook’s launch of Libra. Lots of skepticism in the comments section. And Hannah Murphy reports that [p]ositive Money, a consumer campaign group, attacked the proposal. “Our money is increasingly in the hands of a small number of banks and payment companies, and we should avoid ceding further control to unaccountable corporate interests. Facebook’s plans pose alarming implications for privacy and power in the economy,” said David Clarke, the head...

At the conference of “Positiva Pengar” and “Monetative” in Stockholm, I argued that it is not so much the introduction of CBDC which would make a difference, but the policies accompanying such an introduction. This view is backed by research of Markus Brunnermeier and myself, as well as by myself. Many of the proponents of the sovereign money movement appeared open to the argument. Some of the followers, however, did not; they associate CBDC with many benefits that money, in whatever...

CEPR Discussion Paper 13778, June 2019, with Markus Brunnermeier. PDF. (Local copy of NBER wp.) We develop a generic model of money and liquidity that identifies sources of liquidity bubbles and seignorage rents. We provide sufficient conditions under which a swap of monies leaves the equilibrium allocation and price system unchanged. We apply the equivalence result to the “Chicago Plan,” cryptocurrencies, the Indian de-monetization experiment, and Central Bank Digital Currency (CBDC). In...

Central Banking reports about the new working paper by Markus Brunnermeier and myself.

In the New York Times, John Henderson reports about a new hiking trail in Liechtenstein that was opened to mark the country’s 300-year anniversary. This Cross-Country Hike Took 5 Days. That’s Going the Long Way. According to Lonely Planet, the trail makes Liechtenstein one of the top European travel destinations in 2019.

NBER Working Paper 25877, May 2019, with Markus Brunnermeier. PDF. (Local copy.) We develop a generic model of money and liquidity that identifies sources of liquidity bubbles and seignorage rents. We provide sufficient conditions under which a swap of monies leaves the equilibrium allocation and price system unchanged. We apply the equivalence result to the “Chicago Plan,” cryptocurrencies, the Indian de-monetization experiment, and Central Bank Digital Currency (CBDC). In particular, we...