Should a central bank digital currency (CBDC) be issued? Should its design be cash- or depositlike? To answer these questions, we theoretically and quantitatively assess the effects of a CBDC on consumption, banking and welfare. Our model introduces new general equilibrium linkages across...

We use a simple model to study whether private payment systems based on bank deposits can provide the optimal level of safety. In the model, bank deposits backed by projects are subject to default risk that can be mitigated by a depositor's ex ante and ex post monitoring. Safe payment...

This paper builds a model with imperfect competition in the banking sector. In the model, banks issue deposits and make loans, and deposits can be used as payment instruments by households. We use the model to assess the general equilibrium effects of introducing a central bank digital currency...

Many central banks are contemplating whether to issue a central bank digital currency (CDBC). CDBC has certain potential benefits, including the possibility that it can bear interest. However, using CBDC is costly for agents, perhaps because they lose their anonymity when using CBDC instead of...

Constrained efficiency is characterized in an asset market, subject to search frictions, where sellers are privately informed about the type of their asset. The type determines the opportunity cost of the asset for sellers and the quality of the asset for buyers. The constrained efficient...

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. When the measure of informed buyers is low, there exists a unique and...

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. When...

How does the transmission of monetary policy change when a central bank digital currency (CBDC) is introduced in the economy? Do aspects of CBDC design, such as how substitutable it is with bank deposits and whether it is interest bearing, matter? We study these questions in a general...