Reserves For All? Central Bank Digital Currency, Deposits, and their (Non)-Equivalence

Niepelt, Dirk (2020). Reserves For All? Central Bank Digital Currency, Deposits, and their (Non)-Equivalence. International Journal of Central Banking, 16(3), pp. 211-234. Federal Reserve Board

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This paper offers a macroeconomic perspective on the "Reserves for All" (RFA) proposal to let the general public hold electronic central bank money and transact with it. I propose an equivalence result according to which a marginal substitution of outside money (e.g., RFA) for inside money (e.g., deposits) does not affect macroeconomic outcomes. I identify key conditions for equivalence and argue that these conditions likely are violated, implying that RFA would change macroeconomic outcomes. I also relate the analysis to common arguments found in discussions on RFA and point to inconsistencies and open questions.

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