June 2020 issue contents
Reserves for All? Central Bank Digital Currency, Deposits, and Their (Non)-Equivalence

Dirk Niepelt
Study Center Gerzensee; University of Bern; CEPR; CESIfo


This paper offers a macroeconomic perspective on the "Reserves for All" (RFA) proposal to let the general public hold electronic central bank money and transact with it. I propose an equivalence result according to which a marginal substitution of outside money (e.g., RFA) for inside money (e.g., deposits) does not affect macroeconomic outcomes. I identify key conditions for equivalence and argue that these conditions likely are violated, implying that RFA would change macroeconomic outcomes. I also relate the analysis to common arguments found in discussions on RFA and point to inconsistencies and open questions.

JEL Code: E42, E51, E58, E61, E63, H63.

Full article (PDF, 28 pages, 237 kb)