On the equivalence of private and public money

Author / Creator

Brunnermeier, Markus Konrad author

Available as

Online

Summary

We develop a generic model of money and liquidity that identites sources of liquidity bubbles and seignorage rents. We provide sufficient conditions under which a swap of monies leaves the equilibr...

We develop a generic model of money and liquidity that identites 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.

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