Mohammad Davoodalhosseini is a Senior Economist in the Funds Management and Banking Department. His main research interests are monetary economics and search theory. He is also interested in the role of private information in markets with search frictions, with applications to inter-bank, labor and over-the-counter (OTC) markets. He currently studies the effects of post-financial crisis regulations on various measures of liquidity in OTC markets. His research also concerns central bank digital currency (CBDC). He has studied welfare gains of introducing CBDC, and is interested in the channels through which introducing CBDC may affect banking system and financial stability. Mohammad received his PhD in Economics from the Pennsylvania State University in 2015.
Many central banks are considering whether to issue a new form of electronic money that would be accessible to the public. This new form is usually called a central bank digital currency (CBDC). Issuing a CBDC would have implications on the financial system and more broadly on the wider economy.
We present a policy framework for electronic money and payments. The framework poses a set of positive questions related to the areas of responsibility of central banks: payments systems, monetary policy and financial stability. The questions are posed to four broad forms of e-money: privately or publicly issued, and with centralized or decentralized verification of transactions. This framework is intended to help evaluate the trade-offs that central banks face in the decision to issue new forms of e-money.
A model of over-the-counter markets is proposed. Some asset buyers are informed in that they can identify high quality assets. Heterogeneous sellers with private information choose what type of buyers they want to trade with.
Constrained efficient allocation (CE) is characterized in a model of adverse selection and directed search (Guerrieri, Shimer, and Wright (2010)). CE is defined to be the allocation that maximizes welfare, the ex-ante utility of all agents, subject to the frictions of the environment.