Niepelt, Dirk (2022). Money and Banking with Reserves and CBDC (Discussion papers).
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We analyze retail central bank digital currency (CBDC) in a two-tier monetary system with bank deposit market power and externalities from liquidity transformation. Resource costs of liquidity provision determine the optimal monetary architecture and modified Friedman (1969) rules the optimal monetary policy. Optimal interest rates on reserves and CBDC differ. A calibration for the U.S. suggests a weak case for CBDC in the baseline but a much clearer case when too-big-to-fail banks, tax distortions or instrument restrictions are present. Depending on central bank choices CBDC raises U.S. bank funding costs by up to 1.5 percent of GDP.
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 |
Language: |
English |
Submitter: |
Julia Alexandra Schlosser |
Date Deposited: |
10 Nov 2022 15:19 |
Last Modified: |
05 Dec 2022 16:27 |
BORIS DOI: |
10.48350/174654 |
URI: |
https://boris.unibe.ch/id/eprint/174654 |
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