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Central Bank Digital Currencies: Motives, Economic Implications, and the Research Frontier

Author

Listed:
  • Cyril Monnet

    (Department of Economics, University of Bern, Bern, Switzerland)

  • Hyun Song Shin

    (Bank for International Settlements, Basel, Switzerland)

  • Jon Frost

    (Bank for International Settlements, Basel, Switzerland)

  • Leonardo Gambacorta

    (Bank for International Settlements, Basel, Switzerland)

  • Raphael Auer

    (Bank for International Settlements, Basel, Switzerland)

  • Tara Rice

    (Bank for International Settlements, Basel, Switzerland)

Abstract

In just a few years, central banks have rapidly ramped up their research and development efforts on central bank digital currencies (CBDCs). A growing body of economic research informs these activities, often focusing on the "reserves for all" aspect of CBDCs for retail use. However, CBDCs should be considered in the full context of the digital economy and the centrality of data, which raises concerns around competition, payment system integrity, and privacy. This review gives a guided tour of the growing CBDC literature on the microeconomic considerations related to operation architectures, technologies, and privacy as well as the macroeconomic implications for the financial system, financial stability, and monetary policy. A set of questions, particularly on the cross-border dimensions of CBDCs, remains unresolved and calls for further work to expand the research frontier.

Suggested Citation

  • Cyril Monnet & Hyun Song Shin & Jon Frost & Leonardo Gambacorta & Raphael Auer & Tara Rice, 2022. "Central Bank Digital Currencies: Motives, Economic Implications, and the Research Frontier," Annual Review of Economics, Annual Reviews, vol. 14(1), pages 697-721, August.
    • Handle: RePEc:anr:reveco:v:14:y:2022:p:697-721
    DOI: 10.1146/annurev-economics-051420-020324
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    More about this item

    Keywords

    money; digital currencies; central banks; central bank digital currencies; CBDC; stablecoins; cryptocurrencies; distributed ledgers; big tech; data privacy;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • 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
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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