Monetary Policy with Reserves and CBDC: Optimality, Equivalence, and Politics

Niepelt, Dirk (November 2020). Monetary Policy with Reserves and CBDC: Optimality, Equivalence, and Politics (Discussion Papers 20-18). Department of Economics

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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.

Item Type:

Working Paper

Division/Institute:

03 Faculty of Business, Economics and Social Sciences > Department of Economics

UniBE Contributor:

Niepelt, Dirk

Subjects:

300 Social sciences, sociology & anthropology > 330 Economics

Series:

Discussion Papers

Publisher:

Department of Economics

Language:

English

Submitter:

Dino Collalti

Date Deposited:

12 Jan 2021 16:35

Last Modified:

12 Jan 2021 16:38

BORIS DOI:

10.48350/150722

URI:

https://boris.unibe.ch/id/eprint/150722

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