Discussion paper

DP13778 On the Equivalence of Private and Public Money

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.


Brunnermeier, M and D Niepelt (2019), ‘DP13778 On the Equivalence of Private and Public Money‘, CEPR Discussion Paper No. 13778. CEPR Press, Paris & London. https://cepr.org/publications/dp13778