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.
Staff analytical notes
Improving the conduct of monetary policy is unlikely to be the main motivation for central banks to issue a central bank digital currency (CBDC). While some argue that a CBDC could allow more complex transfer schemes or the ability to break below the zero lower bound, we find these benefits might be small or difficult to realize in practice.
Staff discussion papers
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.
Staff working papers
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.
What is the optimal tax schedule in over-the-counter markets, e.g., those for corporate bonds? I find that an optimal tax schedule is often non-monotonic. For example, trading of some high-price assets should be subsidized, and trading of some low-price assets should be taxed.
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 for the financial system and, more broadly, the wider economy.
Many central banks are contemplating whether to issue central bank digital currency. This piece explores the implications as well as potential motivators of such a step.
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.
- “Adverse Selection with Heterogeneously Informed Agents,” International Economic Review (forthcoming).
- "Constrained Efficiency with Adverse Selection and Directed Search," Journal of Economic Theory, Volume 183, 2019, Pages 568-593.
- "A Policy Framework For E-Money," (with Francisco Rivadeneyra), Canadian Public Policy, forthcoming.
- “Directed Search with Complementarity and Adverse Selection”
- "Dealer Inventory And Market Liquidity," (with Jonathan Chiu and Janet Hua Jiang)