IDEAS home Printed from https://ideas.repec.org/a/ijc/ijcjou/y2021q2a1.html
   My bibliography  Save this article

Broadening Narrow Money: Monetary Policy with a Central Bank Digital Currency

Author

Listed:
  • Jack Meaning

    (Bank of England)

  • Ben Dyson

    (Bank for International Settlements Innovation Hub)

  • James Barker

    (Bank of England)

  • Emily Clayton

    (Bank of England)

Abstract

This paper discusses central bank digital currency (CBDC) and its potential impact on the monetary transmission mechanism. We first offer a general definition of CBDC which should make the concept accessible to a wide range of economists and policy practitioners.We then investigate how CBDC could affect the various stages of transmission, from markets for central bank money to the real economy. We conclude that monetary policy would be able to operate much as it does now, by varying the price or quantity of central bank money. Transmission may even be strengthened for a given change in policy instruments.

Suggested Citation

  • Jack Meaning & Ben Dyson & James Barker & Emily Clayton, 2021. "Broadening Narrow Money: Monetary Policy with a Central Bank Digital Currency," International Journal of Central Banking, International Journal of Central Banking, vol. 17(2), pages 1-42, June.
    • Handle: RePEc:ijc:ijcjou:y:2021:q:2:a:1
    as

    Download full text from publisher

    File URL: http://www.ijcb.org/journal/ijcb21q2a1.pdf
    Download Restriction: no
    File URL: http://www.ijcb.org/journal/ijcb21q2a1.htm
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Armelius, Hanna & Boel, Paola & Claussen, Carl Andreas & Nessén, Marianne, 2018. "The e-krona and the macroeconomy," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue 3, pages 43-65.
    2. Benos, Evangelos & Garratt, Rodney & Gurrola-Perez, Pedro, 2017. "The economics of distributed ledger technology for securities settlement," Bank of England working papers 670, Bank of England.
    3. Christoph Basten & Mike Mariathasan, 2018. "How Banks Respond to Negative Interest Rates: Evidence from the Swiss Exemption Threshold," CESifo Working Paper Series 6901, CESifo.
    4. Kumhof, Michael & Noone, Clare, 2018. "Central bank digital currencies - design principles and balance sheet implications," Bank of England working papers 725, Bank of England.
    5. Ching-Wai (Jeremy) Chiu & John Hill, 2018. "The Rate Elasticity of Retail Deposits in the United Kingdom: A Macroeconomic Investigation," International Journal of Central Banking, International Journal of Central Banking, vol. 14(2), pages 113-158, March.
    6. Barry Eichengreen, 2020. "From Commodity to Fiat and Now to Crypto: What Does History Tell Us?," World Scientific Book Chapters, in: Bernard Yeung (ed.), DIGITAL CURRENCY ECONOMICS AND POLICY, chapter 4, pages 17-39, World Scientific Publishing Co. Pte. Ltd..
    7. Michael D. Bordo & Andrew T. Levin, 2017. "Central Bank Digital Currency and the Future of Monetary Policy," NBER Working Papers 23711, National Bureau of Economic Research, Inc.
    8. Morten Linnemann Bech & Rodney Garratt, 2017. "Central bank cryptocurrencies," BIS Quarterly Review, Bank for International Settlements, September.
    9. Erlend Nier & Heedon Kang, 2016. "Monetary and macroprudential policies – exploring interactions," BIS Papers chapters, in: Bank for International Settlements (ed.), Macroprudential policy, volume 86, pages 27-38, Bank for International Settlements.
    10. Jakab, Zoltan & Kumhof, Michael, 2015. "Banks are not intermediaries of loanable funds – and why this matters," Bank of England working papers 529, Bank of England.
    11. Marvin Goodfriend & Bennett T. McCallum, 2007. "Banking and interest rates in monetary policy analysis: a quantitative exploration," Proceedings, Federal Reserve Bank of San Francisco.
    12. Basten, Christoph & Mariathasan, Mike, 2023. "Interest rate pass-through and bank risk-taking under negative-rate policies with tiered remuneration of central bank reserves," Journal of Financial Stability, Elsevier, vol. 68(C).
    13. Hampl, Mojmir & Havranek, Tomas, 2018. "Central Bank Capital as an Instrument of Monetary Policy," EconStor Preprints 176828, ZBW - Leibniz Information Centre for Economics.
    14. Meaning, Jack & Dyson, Ben & Barker, James & Clayton, Emily, 2018. "Broadening narrow money: monetary policy with a central bank digital currency," Bank of England working papers 724, Bank of England.
    15. Katrin Assenmacher & Signe Krogstrup, 2018. "Monetary Policy with Negative Interest Rates: Decoupling Cash from Electronic Money," IMF Working Papers 2018/191, International Monetary Fund.
    16. Ben Fung & Hanna Halaburda, 2016. "Central Bank Digital Currencies: A Framework for Assessing Why and How," Discussion Papers 16-22, Bank of Canada.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jorge Abad & Galo Nuño Barrau & Carlos Thomas, 2023. "CBDC and the operational framework of monetary policy," BIS Working Papers 1126, Bank for International Settlements.
    2. Constanza Martínez-Ventura & Julián A. Parra-Polania & Tatiana Mora-Arbeláez & Angélica Lizarazo-Cuéllar, 2023. "Expected Macroeconomic Effects of Issuing a Retail CBDC," Borradores de Economia 1247, Banco de la Republica de Colombia.
    3. Dunbar, Kwamie, 2023. "CBDC uncertainty: Financial market implications," International Review of Financial Analysis, Elsevier, vol. 87(C).
    4. Caccia, Enea & Tapking, Jens & Vlassopoulos, Thomas, 2024. "Central bank digital currency and monetary policy implementation," Occasional Paper Series 345, European Central Bank.
    5. Ameen Omar Shareef & K.P. Prabheesh, 2022. "Does International Monetary Policy Influence The Bank Risk? Evidence From India," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 25(2), pages 135-154, August.
    6. Martínez-Ventura , Constanza & Parra-Polanía, Julián A. & Mora-Arbeláez, Tatiana & Lizarazo-Cuéllar, Angélica, 2023. "Expected Macroeconomic Effects of Issuing a Retail Central Bank Digital Currency (CBDC)," Coyuntura Económica, Fedesarrollo, vol. 53, pages 151-177, December.
    7. Christopher J. Gust & Kyungmin Kim & Romina Ruprecht, 2023. "The Effects of CBDC on the Federal Reserve's Balance Sheet," Finance and Economics Discussion Series 2023-068, Board of Governors of the Federal Reserve System (U.S.).
    8. Son, Jaemin & Ryu, Doojin & Webb, Robert I., 2023. "Central bank digital currency: Payment choices and commercial bank profitability," International Review of Financial Analysis, Elsevier, vol. 90(C).
    9. Max Fuchs, 2022. "CBDC as Competitor for Bank Deposits and Cryptocurrencies," MAGKS Papers on Economics 202210, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    10. Nocciola, Luca & Zamora-Pérez, Alejandro, 2024. "Transactional demand for central bank digital currency," Working Paper Series 2926, European Central Bank.
    11. Mastromatteo, Giuseppe & Rossi, Sergio, 2023. "Central Bank Digital Currencies: A Monetary Macroeconomic Analysis," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 76(3), pages 387-416.
    12. Bibi, Samuele & Canelli, Rosa, 2023. "The interpretation of CBDC within an endogenous money framework," Research in International Business and Finance, Elsevier, vol. 65(C).
    13. Dunbar, Kwamie & Treku, Daniel N., 2024. "Examining the impact of a central bank digital currency on the access to banking," International Review of Financial Analysis, Elsevier, vol. 93(C).
    14. Wang, Yizhi & Lucey, Brian M. & Vigne, Samuel A. & Yarovaya, Larisa, 2022. "The Effects of Central Bank Digital Currencies News on Financial Markets," Technological Forecasting and Social Change, Elsevier, vol. 180(C).
    15. Novi Maryaningsih & Suahasil Nazara & Febrio N. Kacaribu & Solikin M. Juhro, 2022. "Central Bank Digital Currency: What Factors Determine Its Adoption?," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 25(1), pages 1-24, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alexandra Mitschke, 2021. "Central Bank Digital Currencies and Monetary Policy Effectiveness in the Euro Area," Working Papers Dissertations 74, Paderborn University, Faculty of Business Administration and Economics.
    2. Dionysopoulos, Lambis & Marra, Miriam & Urquhart, Andrew, 2024. "Central bank digital currencies: A critical review," International Review of Financial Analysis, Elsevier, vol. 91(C).
    3. Agur, Itai & Ari, Anil & Dell’Ariccia, Giovanni, 2022. "Designing central bank digital currencies," Journal of Monetary Economics, Elsevier, vol. 125(C), pages 62-79.
    4. Sarah Allen & Srđjan Čapkun & Ittay Eyal & Giulia Fanti & Bryan A. Ford & James Grimmelmann & Ari Juels & Kari Kostiainen & Sarah Meiklejohn & Andrew Miller & Eswar Prasad & Karl Wüst & Fan Zhang, 2020. "Design Choices for Central Bank Digital Currency: Policy and Technical Considerations," NBER Working Papers 27634, National Bureau of Economic Research, Inc.
    5. Belke, Ansgar & Beretta, Edoardo, 2019. "From cash to central bank digital currencies and cryptocurrencies: A balancing act between modernity and monetary stability," Ruhr Economic Papers 816, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    6. Marcelo A. T. Aragão, 2021. "A Few Things You Wanted to Know about the Economics of CBDCs, but were Afraid to Model: a survey of what we can learn from who has done," Working Papers Series 554, Central Bank of Brazil, Research Department.
    7. Hossein Nabilou, 2020. "Testing the waters of the Rubicon: the European Central Bank and central bank digital currencies," Journal of Banking Regulation, Palgrave Macmillan, vol. 21(4), pages 299-314, December.
    8. Theodore Pelagidis & Eleftheria Kostika, 2022. "Investigating the role of central banks in the interconnection between financial markets and cryptoassets," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 49(3), pages 481-507, September.
    9. Ansgar Belke & Edoardo Beretta, 2020. "From cash to central bank digital currencies and cryptocurrencies: a balancing act between modernity and monetary stability," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 47(4), pages 911-938, June.
    10. Anil Savio Kavuri & Alistair Milne, 2019. "FinTech and the future of financial services: What are the research gaps?," CAMA Working Papers 2019-18, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    11. Eswar Prasad, 2020. "New and evolving financial technologies implications for monetary policy and financial stability in Latin America," Documentos de trabajo 19463, FLAR.
    12. Todd Keister & Daniel Sanches, 2023. "Should Central Banks Issue Digital Currency?," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 90(1), pages 404-431.
    13. Paolo Fegatelli, 2019. "Central bank digital currencies: The case of universal central bank reserves," BCL working papers 130, Central Bank of Luxembourg.
    14. Dimitris Malliaropulos & Petros Migiakis, 2020. "Sovereign credit ratings and the fundamentals of the Greek economy," Economic Bulletin, Bank of Greece, issue 51, pages 1-30, July.
    15. Thitima Chucherd & Chanokkarn Mek-yong & Nalin Nookhwun & Passawuth Nuntnarumit & Natta Piyakarnchana & Suparit Suwanik, 2021. "Monetary and Financial Perspectives on Retail CBDC in the Thai Context," PIER Discussion Papers 152, Puey Ungphakorn Institute for Economic Research.
    16. Constantina Backinezos & Stelios Panagiotou & Christos Papazoglou, 2020. "The current account adjustment in Greece during the crisis: cyclical or structural?," Economic Bulletin, Bank of Greece, issue 51, pages 1-18, July.
    17. Rehman, Mubeen Abdur & Irfan, Muhammad & Naeem, Muhammad Abubakr & Lucey, Brian M. & Karim, Sitara, 2023. "Macro-financial implications of central bank digital currencies," Research in International Business and Finance, Elsevier, vol. 64(C).
    18. Kumhof, Michael & Wang, Xuan, 2021. "Banks, money, and the zero lower bound on deposit rates," Journal of Economic Dynamics and Control, Elsevier, vol. 132(C).
    19. Gérard Mondello & Elena Sinelnikova & Pavel Trunin, 2020. "Macro and Micro Implications of the Introduction of Central Bank Digital Currencies: An Overview," GREDEG Working Papers 2020-02, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France, revised Mar 2020.
    20. Wandhöfer, Ruth, 2019. "Technology innovation in financial markets : Implications for money, payments and settlement finality," Other publications TiSEM b7d8b24a-dbf4-4f82-b596-3, Tilburg University, School of Economics and Management.

    More about this item

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ijc:ijcjou:y:2021:q:2:a:1. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Bank for International Settlements (email available below). General contact details of provider: https://www.ijcb.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.