Bio

Mohammad Davoodalhosseini is the Director of the Research Team in the Banking and Payments (BAP) Department. He joined the Bank in 2015 as a Senior Economist after completing his Ph.D. in Economics at the Pennsylvania State University. Since then, he has held roles including Principal Researcher and Research Advisor in BAP.

His main research interests are monetary economics and search theory. In monetary economics, he studies emerging developments in electronic money and payments, particularly how the introduction of a Central Bank Digital Currency (CBDC) can impact the implementation and transmission of monetary policy, as well as the efficiency and stability of the financial system. Most recently, he explores how tokenization of assets can change the financial landscape. In search theory, he examines how information asymmetries and trading frictions shape market outcomes in various settings, including interbank, labor, and over-the-counter markets.

His work has been published in academic journals such as Journal of Political Economy, Journal of Economic Theory, Management Science, International Economic Review, and Journal of Economic Dynamics and Control.

Research Field(s): Macroeconomic Theory Monetary Economics Money and Banking

Staff research

Data Externalities, Market Power, and the Optimal Design of Central Bank Digital Currencies

Staff working paper 2026-21 Yuteng Cheng, Jonathan Chiu, Mohammad Davoodalhosseini, Janet Hua Jiang
This paper studies how a central bank should design a CBDC when private payment providers collect and monetize transaction data. It characterizes the optimal CBDC’s pricing and data policy, and shows how its effects on private payment use and total data depend on market power and data externalities.
Content Type(s): Staff research, Staff working papers JEL Code(s): G, G2, L, L1, L14 Research Theme(s): Money and payments, Digital assets and fintech, Payment and financial market infrastructures, Retail payments

Tokenization: What it is and how to think about it

Sparks at Bank article Jonathan Chiu, Mohammad Davoodalhosseini, Cam Donohoe, Thorsten Koeppl, Diego Zúñiga
Tokenization involves representing traditional assets as tokens on a digital platform. This financial innovation has the potential to reshape money and markets, but a common approach for comparing system designs and weighing efficiency gains against risks has yet to be defined. We offer such an approach to improve understanding of this expanding technology and guide policy discussions.
Content Type(s): Staff research, Sparks at Bank article Research Theme(s): Money and payments, Digital assets and fintech, Payment and financial market infrastructures

Central Bank Digital Currency and Transmission of Monetary Policy

Staff working paper 2024-27 Saroj Bhattarai, Mohammad Davoodalhosseini, Zhenning Zhao
Using a general equilibrium model with nominal rigidities and financial frictions, we explore whether introducing a central bank digital currency (CBDC) affects the transmission of monetary policy, and how the effects depend on CBDC design features. We also study whether paying interest on central bank liabilities is contractionary or expansionary.
Content Type(s): Staff research, Staff working papers JEL Code(s): E, E3, E31, E4, E5, E58, G, G2, G21, G5, G51 Research Theme(s): Models and tools, Economic models, Monetary policy, Monetary policy framework and transmission, Money and payments, Digital assets and fintech

Central Bank Digital Currencies and Banking: Literature Review and New Questions

Staff discussion paper 2023-4 James Chapman, Jonathan Chiu, Mohammad Davoodalhosseini, Janet Hua Jiang, Francisco Rivadeneyra, Yu Zhu
We review the nascent but fast-growing literature on central bank digital currencies (CBDCs), focusing on their potential impacts on private banks. We evaluate these impacts in three areas of traditional banking: payments, lending and liquidity and maturity transformation. We also take a broader look at CBDCs and highlight two promising directions for future research.
Content Type(s): Staff research, Staff discussion papers JEL Code(s): E, E5, E50, E58, G, G0, G00, L, L0, L00 Research Theme(s): Financial system, Financial institutions and intermediation, Money and payments, Digital assets and fintech, Payment and financial market infrastructures

Central Bank Digital Currency and Banking: Macroeconomic Benefits of a Cash-Like Design

Staff working paper 2021-63 Jonathan Chiu, Mohammad Davoodalhosseini
Should a CBDC be more like cash or bank deposits? An interest-bearing, cash-like CBDC not only makes payments more efficient but also increases total demand. This has positive effects on other transactions, inducing more deposit taking and lending and, thus, bank intermediation.
Content Type(s): Staff research, Staff working papers JEL Code(s): E, E5, E50, E58 Research Theme(s): Financial system, Financial stability and systemic risk, Monetary policy, Monetary policy framework and transmission, Money and payments, Digital assets and fintech, Payment and financial market infrastructures

Safe Payments

Staff working paper 2020-53 Jonathan Chiu, Mohammad Davoodalhosseini, Janet Hua Jiang, Yu Zhu
In a cashless economy, would the private sector invest in the optimal level of safety in a deposit-based payment system? In general, because of externalities, the answer is no. While the private sector could over- or under-invest in safety, the government can use taxes or subsidies to correct private incentives.
Content Type(s): Staff research, Staff working papers JEL Code(s): E, E4, E42, E5, E50, G, G2, G21 Research Theme(s): Money and payments, Digital assets and fintech, Payment and financial market infrastructures, Retail payments

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Journal publications

Journal articles