On the Equivalence of Private and Public Money

Publication Year
2019

Type

Journal Article
Abstract
We develop a generic model of money and liquidity that identifies sources of liquidity bubbles and seignorage rents. We provide sufficient conditions under which a swap of monies leaves the equilibrium allocation and price system unchanged. We apply the equivalence result to the ``Chicago Plan,'' cryptocurrencies, the Indian de-monetization experiment, and Central Bank Digital Currency (CBDC). In particular, we show why CBDC need not undermine financial stability.
Journal
Journal of Monetary Economics
Volume
106
Pages
27-41
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