• Media type: Report; E-Book
  • Title: Monetary policy with reserves and CBDC: Optimality, equivalence, and politics
  • Contributor: Niepelt, Dirk [Author]
  • Published: Gerzensee: Swiss National Bank, Study Center Gerzensee, 2020
  • Language: English
  • Keywords: E51 ; E43 ; deposits ; monetary policy ; Friedman rule ; money creation ; E52 ; bank profits ; equivalence ; E42 ; Ramsey policy ; Reserves ; central bank digital currency
  • Origination:
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  • Description: 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.
  • Access State: Open Access