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On the Equivalence of Private and Public Money

Markus K. Brunnermeier and Dirk Niepelt ()

No 7741, CESifo Working Paper Series from CESifo Group Munich

Abstract: When does a swap between private and public money leave the equilibrium allocation and price system unchanged? To answer this question, the paper sets up a generic model of money and liquidity which identifies sources of seignorage rents and liquidity bubbles. We derive sufficient conditions for equivalence and apply them in the context of the “Chicago Plan”, cryptocurrencies, the Indian de-monetization experiment, and Central Bank Digital Currency (CBDC). Our results imply that CBDC coupled with central bank pass-through funding need not imply a credit crunch nor undermine financial stability.

Keywords: money creation; monetary system; inside money; outside money; equivalence; CBDC; Chicago Plan; sovereign money (search for similar items in EconPapers)
JEL-codes: E40 E50 G10 H60 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac, nep-mon and nep-pay
Date: 2019
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Related works:
Journal Article: On the equivalence of private and public money (2019) Downloads
Working Paper: On the Equivalence of Private and Public Money (2019) Downloads
Working Paper: On the Equivalence of Private and Public Money (2019) Downloads
Working Paper: On the Equivalence of Private and Public Money (2019) Downloads
Working Paper: On the Equivalence of Private and Public Money (2019) Downloads
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