Tuesday, July 19, 2016

John Barrdear and Michael Kumhof — The macroeconomics of central bank issued digital currencies


We study the macroeconomic consequences of issuing central bank digital currency (CBDC) — a universally accessible and interest-bearing central bank liability, implemented via distributed ledgers, that competes with bank deposits as medium of exchange. In a DSGE model calibrated to match the pre-crisis United States, we find that CBDC issuance of 30% of GDP, against government bonds, could permanently raise GDP by as much as 3%, due to reductions in real interest rates, distortionary taxes, and monetary transaction costs. Countercyclical CBDC price or quantity rules, as a second monetary policy instrument, could substantially improve the central bank’s ability to stabilise the business cycle.

Key words: Distributed ledgers, blockchain, banks, financial intermediation, bank lending, money creation, money demand, endogenous money, countercyclical policy. 

1 comment:

André said...

Good example of big effort directed to nonsense research...