The Macroeconomic Effects of an Interest-Bearing CBDC: A DSGE Model
Mathematics
; 10(10):1671, 2022.
Article
in English
| ProQuest Central | ID: covidwho-1870923
ABSTRACT
We develop a medium size dynamic stochastic general equilibrium (DSGE) model to assess the macroeconomic consequences of introducing an interest-bearing central bank digital currency (CBDC), an electronic alternative of payment with public use properties of cash and that can furnish as bank settlement balances. The model consists of seven sectors, namely households, retail firms, wholesale firms, capital producing firms, commercial banks, central bank, and government, and offers rich features. The use of cash and CBDC is differentiated with respect to their prices and transaction costs. In particular, we quantify the effects of negative shock on CBDC transaction cost to evaluate the potential of CBDC as an alternate instrument in liquidity holding in addition to cash and bank deposits. We also examine the effects of productivity shock and monetary policy shock on CBDC interest rate and CBDC demand, and their interaction with other main variables of the model.
Mathematics; DSGE model; interest-bearing CBDC; monetary policy; transaction costs; Currency; Microbalances; Macroeconomics; Banking industry; Households; Pandemics; Digital currencies; Bank deposits; Interest rates; Central banks; Coronaviruses; Commercial banks; COVID-19; Competition; United States--US
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Collection:
Databases of international organizations
Database:
ProQuest Central
Type of study:
Experimental Studies
Language:
English
Journal:
Mathematics
Year:
2022
Document Type:
Article
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