We study the optimal design of a central bank digital currency (CBDC) in an environment where agents sort into cash, CBDC and bank deposits according to their preferences over anonymity and security; and where network effects make the convenience of payment instruments dependent on the number of...

This paper provides a structured overview of the burgeoning literature on the economics of CBDC. We document the economic forces that shape the rise of digital money and review motives for the issuance of CBDC. We then study the implications for the financial system and discuss of a number of...

The prospect of central banks issuing digital currency (CBDC) immediately raises the question of how this new form of money should co-exist and interact with existing forms of money. This paper evaluates three different scenarios for the implementation of CBDC in terms of their monetary policy...

The level and trend in cash use in a country will influence the demand for central bank digital currency (CBDC). While access to digital currency will be more convenient than traveling to an ATM, it only makes CBDC like a bank debit card-not better. Demand for digital currency will thus be weak...

We study the macroeconomic consequences of issuing central bank digital currency (CBDC) — a universally accessible and interest-bearing central bank liability, implemented via distributed ledgers, that competes with bank deposits as medium of exchange. In a DSGE model calibrated to match the...

We calibrate to the Brazilian economy a model of means of payment choice, where households have different preferences over anonymity. Financial sector is monopolistically competitive and may break the link between borrowing and lending rates. A sufficiently attractive digital currency reduces...

There are increasingly many digital alternatives to physical cash as basic means of payment, many of these offered by non-financial private sector actors. While such a trend towards a cashless society brings the convenience of digital payments to users and can encourage innovation in financial...

The Board of Governors of the Federal Reserve System has engaged the public in its consideration of a USD Central Bank Digital Currency (USD CBDC). The Board has framed USD CBDC issues principally around payment market access and efficiency, tending to overlook questions CBDC raises about the...

This paper is a critical engagement with the four design principles for Central Bank Digital Currency (CBDC) recently proposed by Kumhof and Noone (KN). It is argued that the implicit notion of parity underlying KN's analysis is too narrow as it is only focused on the exchange rate between CBDC...