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Central Bank Digital Currency: Welfare and Policy Implications

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  • Stephen Williamson

    (University of Western Ontario)

Abstract

A model of multiple means of payment is constructed to analyze the effects of the introduction of central bank digital currency (CBDC). The introduction of CBDC has three beneficial effects. It mitigates crime associated with physical currency, permits the payment of interest on a key central bank liability, and economizes on scarce safe collateral. CBDC admits another instrument of monetary policy, but may require that the central bank take on private assets in its portfolio if CBDC significantly displaces privately supplied means of payment.

Suggested Citation

  • Stephen Williamson, 2019. "Central Bank Digital Currency: Welfare and Policy Implications," 2019 Meeting Papers 386, Society for Economic Dynamics.
    • Handle: RePEc:red:sed019:386
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    References listed on IDEAS

    as
    1. Williamson, Stephen D., 2019. "Interest on reserves, interbank lending, and monetary policy," Journal of Monetary Economics, Elsevier, vol. 101(C), pages 14-30.
    2. Davoodalhosseini, Seyed Mohammadreza, 2022. "Central bank digital currency and monetary policy," Journal of Economic Dynamics and Control, Elsevier, vol. 142(C).
    3. Kenneth S. Rogoff, 2016. "The Curse of Cash," Economics Books, Princeton University Press, edition 1, number 10798.
    4. 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.
    5. Kumhof, Michael & Noone, Clare, 2018. "Central bank digital currencies - design principles and balance sheet implications," Bank of England working papers 725, Bank of England.
    6. James Chapman & Carolyn A. Wilkins, 2019. "Crypto ‘Money’: Perspective of a Couple of Canadian Central Bankers," Discussion Papers 2019-1, Bank of Canada.
    7. Yu Zhu & Scott Hendry, 2019. "A Framework for Analyzing Monetary Policy in an Economy with E-money," Staff Working Papers 19-1, Bank of Canada.
    Full references (including those not matched with items on IDEAS)

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