by CEPR Discussion Paper 15457, November 2020. PDF (local copy). We analyze policy in a two-tiered monetary system. Noncompetitive banks issue deposits while the central bank issues reserves and a retail CBDC. Monies differ with respect to operating costs and liquidity. We map the framework into a baseline business cycle model with “pseudo wedges” and derive optimal policy rules: Spreads satisfy modified Friedman rules and deposits must be taxed or subsidized. We generalize the Brunnermeier and Niepelt (2019) result on the macro irrelevance of CBDC but show that a deposit based payment system requires higher taxes. The model implies annual implicit subsidies to U.S. banks of up to 0.8 percent of GDP during the period 1999-2017.
Topics:
Dirk Niepelt considers the following as important: Bank, Central Bank, Central bank digital currency, Contributions, Deposit, Equivalence, Friedman rule, Money multiplier, Ramsey policy, Research, Reserves for all
This could be interesting, too:
Dirk Niepelt writes The New Keynesian Model and Reality
Dirk Niepelt writes “Money and Banking with Reserves and CBDC,” JF, 2024
Dirk Niepelt writes Banks and Privacy, U.S. vs Canada
Dirk Niepelt writes “Augenwischerei um SNB-Ausschüttungen (Misconceptions about SNB Distributions),” NZZ, 2024
CEPR Discussion Paper 15457, November 2020. PDF (local copy).
We analyze policy in a two-tiered monetary system. Noncompetitive banks issue deposits while the central bank issues reserves and a retail CBDC. Monies differ with respect to operating costs and liquidity. We map the framework into a baseline business cycle model with “pseudo wedges” and derive optimal policy rules: Spreads satisfy modified Friedman rules and deposits must be taxed or subsidized. We generalize the Brunnermeier and Niepelt (2019) result on the macro irrelevance of CBDC but show that a deposit based payment system requires higher taxes. The model implies annual implicit subsidies to U.S. banks of up to 0.8 percent of GDP during the period 1999-2017.