Using a two-period equilibrium model, we show that the effects of introducing a Central Bank Digital Currency (CBDC) depend on the ongoing monetary policy. We derive neutrality conditions without direct pass-through policies and find that they do not always hold with quantitative easing, as bank lending shrinks if demand for CBDC is above a certain threshold. Moreover, we find that commercial banks optimally liquidate excess reserves in the system to accommodate households’ demand for CBDC. This leads to the replacement of banks with households on the liability side of the central bank balance sheet, making quantitative tightening difficult to implement.
* This paper previousy circulated as "Central Bank Digital Currency and Quantitative Easing".
Presentations: Swiss Finance Institute Research Days (2021)
Network and Risk in Venture Capital Investing [paper available upon request]
Does the network of venture capital firms affect the risk they are willing to take in their investment decisions? I develop a theoretical model of the venture capital investing process and I empirically test its implications. The model considers a representative venture capital fund that decides whether to invest in a startup, and whether to syndicate with another fund. I find that a better connected venture capitalist is able to take more risk, because she is able to improve the company performance with her contacts. Moreover, poorly connected venture capital firms are more likely to enter a syndication, especially when the co-investors are well connected. Finally, I use the Crunchbase database to empirically verify these implications.
Presentations: Swiss Finance Institute Research Days (2020), HEC Lausanne (2019)
"CBDC and business cycle dynamics in a New Monetarist New Keynesian model", by K. Assenmacher, L. Bitter, and A. Ristiniemi, The Digital Revolution and Monetary Policy: What is New? A joint conference of the CEPR MEF group and FinTech RPN, 2022.