Bio

Mohammad Davoodalhosseini is the Director of the Research Team in the Banking and Payments (BAP) Department. He joined the Bank in 2015 as a Senior Economist after completing his Ph.D. in Economics at the Pennsylvania State University. Since then, he has held roles including Principal Researcher and Research Advisor in BAP.

His main research interests are monetary economics and search theory. In monetary economics, he studies emerging developments in electronic money and payments, particularly how the introduction of a Central Bank Digital Currency (CBDC) can impact the implementation and transmission of monetary policy, as well as the efficiency and stability of the financial system. Most recently, he explores how tokenization of assets can change the financial landscape. In search theory, he examines how information asymmetries and trading frictions shape market outcomes in various settings, including interbank, labor, and over-the-counter markets.

His work has been published in academic journals such as Journal of Political Economy, Journal of Economic Theory, Management Science, International Economic Review, and Journal of Economic Dynamics and Control.


Staff analytical notes

CBDC and Monetary Policy

Staff Analytical Note 2020-4 Mohammad Davoodalhosseini, Francisco Rivadeneyra, Yu Zhu
Improving the conduct of monetary policy is unlikely to be the main motivation for central banks to issue a central bank digital currency (CBDC). While some argue that a CBDC could allow more complex transfer schemes or the ability to break below the zero lower bound, we find these benefits might be small or difficult to realize in practice.

See More

Staff discussion papers

Central Bank Digital Currencies and Banking: Literature Review and New Questions

We review the nascent but fast-growing literature on central bank digital currencies (CBDCs), focusing on their potential impacts on private banks. We evaluate these impacts in three areas of traditional banking: payments, lending and liquidity and maturity transformation. We also take a broader look at CBDCs and highlight two promising directions for future research.

A Policy Framework for E-Money: A Report on Bank of Canada Research

Staff Discussion Paper 2018-5 Mohammad Davoodalhosseini, Francisco Rivadeneyra
We present a policy framework for electronic money and payments. The framework poses a set of positive questions related to the areas of responsibility of central banks: payments systems, monetary policy and financial stability. The questions are posed to four broad forms of e-money: privately or publicly issued, and with centralized or decentralized verification of transactions. This framework is intended to help evaluate the trade-offs that central banks face in the decision to issue new forms of e-money.

See More

Staff working papers

Central Bank Digital Currency and Transmission of Monetary Policy

How does the transmission of monetary policy change when a central bank digital currency (CBDC) is introduced in the economy? Does CBDC design matter? We study these questions in a general equilibrium model with nominal rigidities, liquidity frictions, and a banking sector where commercial banks face a leverage constraint.

Central Bank Digital Currency and Banking: Macroeconomic Benefits of a Cash-Like Design

Staff Working Paper 2021-63 Jonathan Chiu, Mohammad Davoodalhosseini
Should a CBDC be more like cash or bank deposits? An interest-bearing, cash-like CBDC not only makes payments more efficient but also increases total demand. This has positive effects on other transactions, inducing more deposit taking and lending and, thus, bank intermediation.

Safe Payments

In a cashless economy, would the private sector invest in the optimal level of safety in a deposit-based payment system? In general, because of externalities, the answer is no. While the private sector could over- or under-invest in safety, the government can use taxes or subsidies to correct private incentives.

Optimal Taxation in Asset Markets with Adverse Selection

Staff Working Paper 2020-11 Mohammad Davoodalhosseini
What is the optimal tax schedule in over-the-counter markets, e.g., those for corporate bonds? I find that an optimal tax schedule is often non-monotonic. For example, trading of some high-price assets should be subsidized, and trading of some low-price assets should be taxed.

Bank Market Power and Central Bank Digital Currency: Theory and Quantitative Assessment

We show that issuing a deposit-like central bank digital currency (CBDC) with a proper interest rate would encourage banks to pay higher interest to keep their customers. Banks would then attract more deposits and offer more loans. Hence, a CBDC would not necessarily crowd out private banking.

Adverse Selection with Heterogeneously Informed Agents

Staff Working Paper 2018-7 Mohammad Davoodalhosseini
A model of over-the-counter markets is proposed. Some asset buyers are informed in that they can identify high quality assets. Heterogeneous sellers with private information choose what type of buyers they want to trade with.

Constrained Efficiency with Adverse Selection and Directed Search

Staff Working Paper 2017-15 Mohammad Davoodalhosseini
Constrained efficient allocation (CE) is characterized in a model of adverse selection and directed search (Guerrieri, Shimer, and Wright (2010)). CE is defined to be the allocation that maximizes welfare, the ex-ante utility of all agents, subject to the frictions of the environment.

See More


Journal publications

Journal articles