Adalid et al., (2022), "Central bank digital currency and bank intermediation", ECB Occasional Paper, 2022/293

In view of the significant degree of uncertainty surrounding the design of a potential digital euro, its demand and the prevailing environment in which it would be introduced, this paper explores a set of analytical exercises that can offer insights into the consequences it could have for bank intermediation in the euro area.

SUERF Policy Note, Issue No 281 "CBDC and Bank Intermediation in the Euro Area", June 14th 2022

Central Banking Article, Issue No 149 "CBDC and bank intermediation in the eurozone", June 14th 2022

Presented at the European Central Bank, the European Commission, Deloitte Madrid, SUERF Webinar (forthcoming)

Working papers

The Euro as a Diverse Monetary Union (with Enrico Perotti) - submitted

We analyze causes and consequences of a monetary unification among countries with different institutional quality. Countries with stronger institutions choose a more productive policy, resulting in a stronger currency and lower taxes. Governments under weaker institutions prefer more spending and may require devaluation to ensure fiscal solvency. Creating a diverse monetary union (DMU) leads to rapid market adjustments while nominal wages lag and institutional differences persist. A credible DMU tend to involve hidden re- and devaluations with redistributive effects across countries. Productive and fiscal capacity improve in stronger countries, public spending in weaker countries is less constrained just as their fiscal capacity is reduced by the revaluation. Firms and employment gain in stronger countries, along with savers in weaker countries. In bad times a stable DMU benefits from a credible internal fiscal transfer, balancing the initial shift in fiscal capacity. A weak country government may agree to join a DMU as it enables more public spending, even though its productive capacity suffers.

VoxEU column "The euro: A transfer union from the start": link

SUERF Policy Note, Issue No 149 "A diverse monetary union creates invisible transfers that justify conditional solidarity"

CEPR discussion paper: link

Presented at the University of Amsterdam, Tinbergen Institute, EDEEM Doctoral Workshop 2019, the Dutch central bank, the European Stability Mechanism, the 2020 EEA annual congress and the CEPR Conference: The Politics of Regulation and Central Banking

I show that a common fiscal policy can benefit all member states of a monetary union by satisfying the demand for safety. There is evidence for a large demand for safety, and it has been argued that a shortage of safe assets played a key role in the financial crisis and European sovereign debt crisis. I analyse a two-country model of a monetary union where governments choose public spending and bond issuance to satisfy the safety demand of households. Individually, national governments supply an insufficient amount of public safety as they don't internalize that their public spending also benefits foreign households by increasing the total safety supply in the monetary union. I show that a common fiscal policy consisting of common public spending funded by common debt can result in a Pareto improvement when it increases the public safety supply, both with and without fiscal transfers.

Presented at the University of Amsterdam, the KVS new paper session 2020, the 16th Macro Finance Society Workshop, Warwick Economics PhD Conference 2020, the Nederlandse Economenweek 2020 and the AFA 2021 Annual Meeting Ph.D. Poster Session, and the Tinbergen Institute.

Work in progress

In Search for Safety: Cash, Insured Deposits, or Central Bank Digital Currency?

Co-authored with Manuel A. Muñoz

Draft forthcoming

How may bank balance sheets adjust after the introduction of a digital euro?

Co-authored with Barbara Meller and Petya Radulova

Draft forthcoming

Non-refereed publications

Koutny et al., (2022) "How to Unlock the European Investment Bank’s Potential: four reforms", FEPS policy study

Co-authored with Christian Koutny, Johannes G. v. Luckner, and Neil Warner

Soons, O., (2020) "Structurele divergentie binnen eurogebied blijft bestaan", ESB, 105(4781) --- (PDF)

News coverage: Het Financieel Dagblad --- BNR Radio interview

Other Research Activities

  • Discussant at the book panel on 'The Politics of Monetary Solidarity' by Dr. Waltraud Schelkle (2019), organized by the Amsterdam Centre for European Studies (ACES)