Arbeitspapier

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

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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.

Language: Englisch

Bibliographic citation: Series: CESifo Working Paper ; No. 8712

Classification: Wirtschaft
Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems
Interest Rates: Determination, Term Structure, and Effects
Money Supply; Credit; Money Multipliers
Monetary Policy

Subject: reserves
deposits
central bank digital currency
monetary policy
Friedman rule
equivalence
Ramsey policy
bank profits
money creation

Event: Geistige Schöpfung

(who): Niepelt, Dirk

Event: Veröffentlichung

(who): Center for Economic Studies and Ifo Institute (CESifo)

(where): Munich

(when): 2020

Handle: http://hdl.handle.net/10419/229530

Last update: 10.03.2025, 11:43 AM CET

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Object type

Arbeitspapier

Associated

Niepelt, Dirk
Center for Economic Studies and Ifo Institute (CESifo)

Time of origin

2020

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