Ecole Polytechnique CREST
5 Avenue le Chatelier
Palaiseau, Fran 91120
Institutional Affiliations: Ecole Polytechnique CREST and CEPR
Information about this author at RePEc
NBER Working Papers and Publications
|February 2020||Central Bank Digital Currency: Central Banking For All?|
with Jesús Fernández-Villaverde, Daniel Sanches, Harald Uhlig: w26753
The introduction of a central bank digital currency (CBDC) allows the central bank to engage in large-scale intermediation by competing with private financial intermediaries for deposits. Yet, since a central bank is not an investment expert, it cannot invest in long-term projects itself, but relies on investment banks to do so. We derive an equivalence result that shows that absent a banking panic, the set of allocations achieved with private financial intermediation will also be achieved with a CBDC. During a panic, however, we show that the rigidity of the central bank's contract with the investment banks has the capacity to deter runs. Thus, the central bank is more stable than the commercial banking sector. Depositors internalize this feature ex-ante, and the central bank arises as...
|August 2019||Cryptocurrencies, Currency Competition, and the Impossible Trinity|
with Pierpaolo Benigno, Harald Uhlig: w26214
We analyze a two-country economy with complete markets, featuring two national currencies as well as a global (crypto)currency. If the global currency is used in both countries, the national nominal interest rates must be equal and the exchange rate between the national currencies is a risk- adjusted martingale. We call this result Crypto-Enforced Monetary Policy Synchronization (CEMPS). Deviating from interest equality risks approaching the zero lower bound or the abandonment of the national currency. If the global currency is backed by interest-bearing assets, additional and tight restrictions on monetary policy arise. Thus, the classic Impossible Trinity becomes even less reconcilable.
|April 2018||Some Simple Bitcoin Economics|
with Harald Uhlig: w24483
In a novel model of an endowment economy, we analyze coexistence and competition between traditional fiat money (Dollar) and another intrinsically worthless medium of exchange, not controlled by a central bank, such as Bitcoin. Agents can trade consumption goods in either currency or hold on to currency for speculative purposes. A central bank ensures a Dollar inflation target, while Bitcoin mining is decentralized via proof-of-work. We analyze Bitcoin price evolution and interaction between the Bitcoin price and monetary policy which targets the Dollar. We obtain a fundamental pricing equation, which in its simplest form implies that Bitcoin prices form a martingale. We derive conditions, under which Bitcoin speculation cannot happen, and the fundamental pricing equation must hold. We sho...
Published: Linda Schilling & Harald Uhlig, 2019. "Some simple Bitcoin Economics," Journal of Monetary Economics, . citation courtesy of