Mohammad Davoodalhosseini - Latest
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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. -
Central Bank Digital Currency and Banking: Macroeconomic Benefits of a Cash-Like Design
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
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. -
CBDC and Monetary Policy
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. -
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. -
Central Bank Digital Currency and Monetary Policy
Many central banks are contemplating whether to issue central bank digital currency. This piece explores the implications as well as potential motivators of such a step. -
A Policy Framework for E-Money: A Report on Bank of Canada Research
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. -
Adverse Selection with Heterogeneously Informed Agents
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.