Author Archives: Ole Rummel

Central Bank Digital Currencies and Financial Inclusion

Despite the fact that central bank digital currencies (CBDCs) are frequently called ‘a solution in search of a problem’, some 86 per cent of central banks worldwide are actively researching the potential for a CBDC. Their design, implementation and adoption will be strongly influenced by country specific objectives and there is no ‘one-size-fits-all’ solution. One prominent objective for a CBDC is financial inclusion, i.e., facilitating access to financial services for the world’s 1.7 billion under- or unbanked. The implicit assumption is that a CBDC and its associated technology provides better access to financial services than current systems. But this is putting the CBDC cart before the horse: a CBDC can at best be part of the solution, but it is unlikely to be the only solution. For a CBDC to increase financial inclusion, it must address the causes of exclusion, and any CBDC initiative would need to be embedded in a much wider set of reforms undertaken by the government in co-operation with the private sector. A CBDC will enhance inclusion only if this dimension features prominently in its design from the outset. There are more straightforward and targeted ways to support access to financial services than to launch a CBDC.

What about “Terms and Conditions”? Going Back to the Code of Hammurabi

What matters is not so much the money supply or the T-bill interest rate, but the availability of credit, and the terms at which credit is made available…. An increase in credit availability may not lead to more spending on produced goods, but increased prices for land or other fixed assets; it can go to […]

Four Praises and a Funeral: In Defence of Short Selling

Everyone loves a good underdog story in which an unlikely hero takes on a mighty foe in the face of overwhelming odds. The recent US stock market uprising involving the mobilisation of retail investors to collectively drive up the share price of GameStop, a video-game retailer best known for its bricks and mortar stores, can […]

Credit where credit is due: calculating credit-to-GDP gaps

In the wake of the Great Financial Crisis, the Basel Committee on Banking Supervision (BCBS) argued for counter-cyclical capital buffers and published operational guidelines (BCBS 2010) for regulators.  The cornerstone of the BCBS proposal was the use of cyclical movements in the credit-to-GDP ratio gap to trigger increases in the capital required to be held […]