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

Dirk Niepelt

No 20.05, Working Papers from Swiss National Bank, Study Center Gerzensee

Abstract: 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.

Pages: 46 pages
Date: 2020-11
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
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Citations: View citations in EconPapers (25)

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Related works:
Working Paper: Monetary Policy with Reserves and CBDC: Optimality, Equivalence, and Politics (2020)
Working Paper: Monetary Policy with Reserves and CBDC: Optimality, Equivalence, and Politics (2020)
Working Paper: Monetary Policy with Reserves and CBDC: Optimality, Equivalence, and Politics (2020)
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