Reserves for All? Central Bank Digital Currency, Deposits, and their (Non)-Equivalence

27 Pages Posted: 1 Oct 2018

See all articles by Dirk Niepelt

Dirk Niepelt

Swiss National Bank - Study Center Gerzensee; University of Bern - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: August 08, 2018

Abstract

I offer a macroeconomic perspective on the “Reserves for All” (RFA) proposal to let the general public use electronic central bank money. After distinguishing RFA from cryptocurrencies and relating the proposal to discussions about narrow banking and the abolition of cash I propose an equivalence result according to which a marginal substitution of outside for inside money does not affect macroeconomic outcomes. I identify key conditions on bank and government (central bank) incentives for equivalence and argue that these conditions likely are violated, implying that RFA would change macroeconomic outcomes. I also relate my analysis to common arguments in the discussion about RFA and point to inconsistencies and open questions.

Keywords: central bank digital currency, Fedcoin, CADcoin, e-krona, e-Peso, J Coin, reserves for all, deposits, narrow banking, cash, equivalence, central bank, lender of last resort, politico-economic equivalence

JEL Classification: E420, E510, E580, E610, E630, H630

Suggested Citation

Niepelt, Dirk, Reserves for All? Central Bank Digital Currency, Deposits, and their (Non)-Equivalence (August 08, 2018). CESifo Working Paper Series No. 7176, Available at SSRN: https://ssrn.com/abstract=3254206 or http://dx.doi.org/10.2139/ssrn.3254206

Dirk Niepelt (Contact Author)

Swiss National Bank - Study Center Gerzensee ( email )

Switzerland

University of Bern - Department of Economics ( email )

Schanzeneckstrasse 1
Bern, CH-3001
Switzerland

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