Journal: CEPR Discussion Papers

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Centre for Economic Policy Research

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0265-8003

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Publications 1 - 10 of 53
  • Why Bank Money Creation?
    Item type: Working Paper
    Gersbach, Hans; Zelzner, Sebastian (2022)
    CEPR Discussion Papers
    We provide a rationale for bank money creation in our monetary system by examining its merits over a system with banks as intermediaries of loanable funds. The latter system could result when CBDCs are introduced. In the loanable funds system, households limit banks’ leverage when providing deposits such that banks have enough “skin in the game” and monitor loans. When there is unobservable heterogeneity among banks with regard to their monitoring efficiency, aggregate bank lending is inefficiently low. A monetary system with bank money creation alleviates this problem, as banks can initiate lending by creating bank deposits without relying on household funding. With a suitable regulatory leverage constraint, the gains from higher bank lending outweigh losses from banks which are less diligent in monitoring. Bank-risk assessments, combined with appropriate risk-sensitive capital requirements, can reduce or even eliminate such losses.
  • Money Creation, Monetary Policy, and Capital Regulation
    Item type: Working Paper
    Faure, Salomon; Gersbach, Hans (2016)
    CEPR Discussion Papers
    We develop a general equilibrium model to study money creation by private banks and examine the impact of monetary policy and capital regulation. There are two production sectors, financial intermediation, aggregate shocks, safe deposits, and two types of money creation: private deposits when banks grant loans to firms or to other banks and central bank money when the central bank grants loans to private banks. We show that in the baseline model, equilibria yield the first-best level of money creation and lending, regardless of the monetary policy or capital regulation. If we add price rigidities coupled with the zero lower bound, there may be no equilibrium with banks, but undernormal economic conditions, an adequate combination of monetary policy and capital regulation can restore the existence of equilibria and efficiency. Finally, we show that Forward Guidance and capital regulation can only avoid a slump in money creation and lending if economic conditions are sufficiently favorable.
  • Crowdsearch
    Item type: Working Paper
    Gersbach, Hans; Mamageishvili, Akaki; Pitsuwan, Fikri (2023)
    CEPR Discussion Papers
    A common phenomenon is crowdsearch, i.e. when a group of agents is invited to search for a valuable physical or virtual object, e.g. creating and patenting on an invention, solving an open scientific problem, searching for a vulnerability in softwares, or mining for a nonce in proof-of-work blockchains. We study a binary model of crowdsearch in which agents have different abilities to find the object. We characterize the types of equilibria and identify which type of crowd guarantees that the object is found. Sometimes even an unlimited crowd is not sufficient. It can happen that inviting more agents lowers the probability of finding the object, which may also happen when non-strategic agents are added. We characterize the optimal prize and show that having one prize (winner-takes-all) maximizes the probability of finding the object but this is not necessarily optimal for the crowdsearch designer.
  • Lemons and Peaches: A (Robust) Multi-stage Buying Mechanism with Multiple Applications
    Item type: Working Paper
    Gersbach, Hans; Mamageishvili, Akaki; Tejada, Oriol (2019)
    CEPR Discussion Papers
    We introduce a four-stage, multi-price buying mechanism, which can be used by a (big) buyer to separate low-quality sellers - called "lemon" owners - from high-quality sellers - called "peach" owners. With a partition of sellers, the buyer obtains the commodities from the "peach" owners at a price that matches the willingness to sell. By contrast, "lemon" owners are trapped into selling their items at a low, or even negligible, price. Our mechanism is robust for several extensions of our baseline setup, offers applications for market makers and regulators, and may be used by interest groups in politics.
  • Credit Enforcement and Monetary-Policy Transmission
    Item type: Working Paper
    Althanns, Markus; van Buggenum, Hugo; Gersbach, Hans (2024)
    CEPR Discussion Papers
    We study how the degree of credit enforcement matters for the transmission of long-run inflation and the welfare effect of private-money creation. We do so in a model with directed and competitive search, where sellers borrow against their search-market income. Intermediaries sell the arising claims as private money to buyers, who use it along with fiat money to transact in the search market. Inflation stimulates borrowing by curbing real interest rates. With sophisticated enforcement, sellers borrow more through ex-ante commitment to more search, as this increases their search-market income. Trade therefore accelerates. With simple enforcement, commitment is not feasible. The inflation-driven increase in borrowing then decelerates trade since debt distorts search incentives ex post. We calibrate the economies with sophisticated and simple enforcement to U.S. data. The extent of private-money creation is close to optimal in the sophisticated enforcement calibration, whereas in the simple-enforcement calibration, any level of private-money creation reduces welfare.
  • Monetary Policy with a Central Bank Digital Currency: The Short and the Long Term
    Item type: Working Paper
    Böser, Florian; Gersbach, Hans (2020)
    CEPR Discussion Papers
    We examine how the introduction of an interest-bearing central bank digital currency (CBDC) impacts bank activities and monetary policy. Depositors can switch from bank deposits to CBDC as a safe medium of exchange at any time. As banks face digital runs, either because depositors have a preference for CBDC or fear bank insolvency, monetary policy can use collateral requirements (and default penalties) to initially increase bankers' monitoring incentives. This leads to higher aggregate productivity. However, the mass of households holding CBDC will increase over time, causing additional liquidity risk for banks. After a certain period, monetary policy with tight collateral requirements generating liquidity risk for banks and exposing bankers to default penalties would render banking non-viable and prompt the central bank to abandon such policies. Under these circumstances, bankers' monitoring incentives will revert to low levels. Accordingly, a CBDC can at best yield short-term welfare gains.
  • The Trade Effects of Skilled versus Unskilled Migration
    Item type: Working Paper
    Egger, Peter; Nelson, Douglas; von Ehrlich, Maximilian (2012)
    CEPR Discussion Papers
    In this paper we assess the role of skilled versus unskilled migration for bi- lateral trade using a exible reduced-form model where the stocks of skilled and unskilled migrants at the country-pair level are determined as endogenous continuous treatments. The impact of dierent levels of skilled and unskilled migration on the volume and structure of bilateral trade is identied in a quasi-experimental design. This is accomplished through a generalization of propensity score estimation procedures for a case of multivariate multi-valued treatments whereof the bivariate continuous treatment model is a special case. We nd evidence of a polarized impact of skill-specic migration on trade: highly concentrated skilled or unskilled migrants induce higher trade volumes than an balanced composition of the immigrant base. Regarding the structure of trade, skilled migrants tend to induce more trade in dierentiated goods while unskilled migrants tend to induce more trade in standard goods. Both bits of evidence are consistent with a segregation of skill-specic immigrant networks and corresponding consumption patterns and eects on trade.
  • China's Dazzling Transport-Infrastructure Growth: Measurement and Effects
    Item type: Working Paper
    Egger, Peter; Loumeau, Gabriel; Loumeau, Nicole (2020)
    CEPR Discussion Papers
    We document an unprecedented change in the size and the quality of China's transport-infrastructure network between 2000 and 2013. This documentation is based on hand-collected and digitized data on roads and railways. The changes are summarized and portrayed as shortest-possible transport times of people and goods between 330 prefectures of mainland China. A quantitative model of China's prefectures and a Rest of the World, featuring both goods trade and migration, suggests that the long-run consequences of the transport-infrastructure changes induce regional convergence of lagging-behind prefectures in terms of population density and, to a lesser extent, in terms of real per-capita income. Not only changes in highway and high-speed-railway networks but also ones in lower-level road and railway networks are quantitatively important. Key drivers behind the effects are the facilitation of goods transport as well as technology diffusion, while the reduction of mobility costs and the diffusion of amenities appear less important.
  • Public Debt and the Balance Sheet of the Private Sector
    Item type: Working Paper
    Gersbach, Hans; Rochet, Jean-Charles; von Thadden, Ernst-Ludwig (2022)
    CEPR Discussion Papers
    This paper studies the sustainability and distributive effects of fiscal policy in a simple model with incomplete financial markets and heterogeneous agents. The model features households and firms, which face non-insurable idiosyncratic productivity shocks. There is only one financial asset, namely risk free debt, issued by the firms and the government, and bought by households. Higher government debt changes the balance sheet of the private sector by boosting corporate equity, increases the risk free rate r, and reduces the growth rate of output g. It is always optimal to issue government debt and by choosing the appropriate combination of public debt, taxes, and subsidies, the government can implement the constrained social welfare optimum. The weight of firms and their owners in the government's welfare function determines whether r < g or r > g at the optimum. The dynamics of the economy is quite different in these two regimes.
  • Staking Pools on Blockchains
    Item type: Working Paper
    Gersbach, Hans; Mamageishvili, Akaki; Schneider, Manvir (2022)
    CEPR Discussion Papers
    On several proof-of-stake blockchains, agents engaged in validating transactions can open a pool to which others can delegate their stake in order to earn higher returns. We develop a model of staking pool formation in the presence of malicious agents and establish existence and uniqueness of equilibria. We then identify potential and risk of staking pools. First, allowing for staking pools lowers blockchain security. Yet, honest stake holders obtain higher returns. Second, by choosing welfare optimal distribution rewards, staking pools prevent malicious agents from receiving large rewards. Third, when pool owners can freely distribute the returns from validation to delegators, staking pools disrupt blockchain operations, since malicious agents attract most delegators by offering generous returns.
Publications 1 - 10 of 53