Tuesday , July 16 2019
Home / Dirk Niepelt / “On the Equivalence of Private and Public Money,” JME, 2019

“On the Equivalence of Private and Public Money,” JME, 2019

Summary:
Accepted for publication in the Journal of Monetary Economics, with Markus Brunnermeier. (NBER wp.) 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 Bank Digital Currency (CBDC). Our results imply that CBDC coupled with central bank pass-through funding need not imply a credit crunch nor undermine financial stability.

Topics:
Dirk Niepelt considers the following as important: , , , , , , , , ,

This could be interesting, too:

Dirk Niepelt writes Jean-Pierre Landau Argues for CBDC

Dirk Niepelt writes “Das Geschäftsmodell hinter Libra (Libra’s Business Model),” Jusletter, 2019

Dirk Niepelt writes “Digitales Zentralbankgeld (Central Bank Digital Currency),” FuW, 2019

Dirk Niepelt writes The Bank of England Welcomes Fintech

Accepted for publication in the Journal of Monetary Economics, with Markus Brunnermeier. (NBER wp.)

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 Bank Digital Currency (CBDC). Our results imply that CBDC coupled with central bank pass-through funding need not imply a credit crunch nor undermine financial stability.

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.

Leave a Reply

Your email address will not be published. Required fields are marked *