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Central bank digital currency and monetary policy: a literature review

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  • Beniak, Patrycja

Abstract

Rapid digitalisation of payments leads to greater cost and time efficiency, yet could also potentially trigger legal and security challenges as well as lead to weakening of finan- cial stability and less effective monetary policy transmission. In order to ensure greater safety, central banks are contemplating and testing solutions thanks to which public using payment innovations could transact in funds that are ultimately backed by central bank. One of these solutions is central bank digital currency, a digital version of cash. The pro- posed versions of central bank digital currency are very diverse. Depending on the version assumed by a particular central bank, central bank digital currency can have an impact on central bank interest rate setting, monetary policy implementation and transmission mechanism. This relates most notably to effective lower bound which could either rise or fall, conditional on design on central bank digital currently.

Suggested Citation

  • Beniak, Patrycja, 2019. "Central bank digital currency and monetary policy: a literature review," MPRA Paper 96663, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:96663
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    File URL: https://mpra.ub.uni-muenchen.de/96663/1/MPRA_paper_96663.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Jesus Fernandez-Villaverde & Daniel Sanches & Linda Schilling & Harald Uhlig, 2021. "Central Bank Digital Currency: Central Banking For All?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 41, pages 225-242, July.
    2. Hasan, Iftekhar & Kwak, Boreum & Li, Xiang, 2024. "Financial technologies and the effectiveness of monetary policy transmission," European Economic Review, Elsevier, vol. 161(C).
    3. Hull, Isaiah & Sattath, Or, 2021. "Revisiting the Properties of Money," Working Paper Series 406, Sveriges Riksbank (Central Bank of Sweden).
    4. Zhang, Runze & Li, Zhijun & Xiao, Chunqu & You, Jiwang, 2023. "New engines of economic growth: How digital currencies lead the way to growth in the era of digital economy," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 1597-1617.
    5. Hasan, Iftekhar & Kwak, Boreum & Li, Xiang, 2023. "Financial technologies and the effectiveness of monetary policy transmission," IWH Discussion Papers 26/2020, Halle Institute for Economic Research (IWH), revised 2023.
    6. Sedegah Kordzo & Odhiambo Nicholas M., 2021. "A Review of the Impact of External Shocks on Monetary Policy Effectiveness in Non-WAEMU Countries," Studia Universitatis „Vasile Goldis” Arad – Economics Series, Sciendo, vol. 31(3), pages 37-59, September.
    7. Ferry Syarifuddin & Toni Bakhtiar, 2021. "Monetary Policy Strategy In The Presence Of Central Bank Digital Currency," Working Papers WP/09/2021, Bank Indonesia.

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    More about this item

    Keywords

    virtual currencies; central bank digital currency; monetary policy; effective lower bound;
    All these keywords.

    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
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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