Thiel, L., and Michaelis, J. (2023): Digitales Zentralbankgeld: Warum wagt niemand den ersten Schritt?, Vierteljahrshefte für Wirtschaftsforschung, Vol.92(3), pp.9-22. Link (Translated from German : Central Bank Digital Currency: Why does no one dare to take the first step?).
Abstract: Despite about six years of intensive research, no central bank in the industrialized world has yet introduced central bank digital currency (CBDC). In this article, we look at the reasons. We provide a brief overview of the current state of research projects, which features stand out as particularly critical, and the economics of impact. We focus on the substitution relationship of CBDC and previously existing liquid assets, the potential risks and opportunities for financial stability, and the potential macroeconomic implications. It turns out that neither the theoretical nor empirical studies come to a consistent conclusion about the likely impact. Despite all the uncertainties, we sum up: In 10 years, CBDCs will be established worldwide.
Schwanebeck, B. and Thiel, L. (2025): Household Heterogeneity across Countries and Optimal Monetary Policy in a Monetary Union. (This paper previously circulated as "Does Household Heterogeneity across Countries Matter for Optimal Monetary Policy within a Monetary Union?" and is available as a Working Paper in the Joint Discussion Paper Series in Economics, Discussion Paper No. 12-2025} (Apr 2025).)
Abstract: The financial situation of households differs substantially across countries, but the implications of this heterogeneity is still vastly understudied. We examine the implications of this asymmetry for optimal monetary policy in a currency union. We build a two-country monetary union model with heterogeneous households leading to inequality due to imperfect insurance. We introduce money through central bank digital currency (CBDC) as a liquid asset for self-insurance against idiosyncratic risk. CBDC is a new instrument which allows the central bank to target heterogeneity within a monetary union. We derive a welfare function with two additional objectives, consumption inequality within and across countries. The more heterogeneous households are, the less important inflation stabilization becomes in favor of stabilizing consumption inequality through providing money. We provide important policy implications as we show that it is beneficial for a monetary union to have a country-specific instrument to compensate for country differentials.
Thiel, L. (2025): Monetary Policy and Inequality: the Role of Household Heterogeneity and Imperfect Insurance. (This paper previously circulated as "Monetary Policy and Inequality: A Two-way Relation" and is available as a Working Paper version in the Joint Discussion Paper Series in Economics, Discussion Paper No. 04-2023 (Feb 2023).) Single Author.
Abstract: This paper draws on empirical evidence that monetary policy affects the tightness of financial conditions and thus the number of financially-constrained households. I study the transmission of monetary policy in a tractable heterogeneous agent New Keynesian model with imperfect insurance, where the share of financially-constrained households endogenously adjusts to interest rate changes. Inequality between saver and hand-to-mouth households amplifies monetary policy effects on aggregate demand, with monopolistic rents enhancing and redistribution mitigating this amplification effect. The analysis has important policy implications since imperfect insurance and financially-constrained households can make monetary policy more powerful.
Schwanebeck, B. and Thiel, L. (2025): The Supply-Side Effects of Household Heterogeneity (Reject & Resubmit, European Economic Review). (This paper is available as a Working Paper version in the Joint Discussion Paper Series in Economics, Discussion Paper No. 03-2025 (Jan 2025).)
Abstract: Household heterogeneity has been shown to be an important driver of aggregate demand. In this research, we demonstrate that it also impacts the supply side. We build a model in which heterogeneous households vary in their extent to which they supply production factors (labor and capital). Our model offers novel results about the consequences of inequality for the supply side, showing that (i) inequality distorts the factor allocation leading to higher marginal costs, and (ii) inequality becomes part of the Phillips curve. This is the “misallocation channel of inequality”. The cyclicality of inequality crucially depends on how important capital is for production. Our findings have important implications for building models with household heterogeneity and for optimal monetary policy.
Schwanebeck, B. and Thiel, L. (2025): When Household Heterogeneity Meets Financial Frictions (Working Title).