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Central bank digital currency and cryptocurrency in emerging markets

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  • Le, Anh H.

Abstract

In this paper, I introduce a New Keynesian - Dynamic Stochastic General Equilibrium (NK-DSGE) model to examine the implications of CBDCs and cryptocurrency in an open economy for emerging markets. In our model, cryptocurrency is implemented as a form of deposit in banks where bankers can also receive deposits from abroad. Lastly, CBDCs are introduced as a payment and saving instrument. I find that cryptocurrency has a crucial role in banking sectors and a significant effect on the dynamic of foreign debt which is highly important for emerging markets. Moreover, I uncover that CBDCs can generate welfare gains but the gain varies with their designs.

Suggested Citation

  • Le, Anh H., 2025. "Central bank digital currency and cryptocurrency in emerging markets," International Economics, Elsevier, vol. 181(C).
    • Handle: RePEc:eee:inteco:v:181:y:2025:i:c:s2110701724001008
    DOI: 10.1016/j.inteco.2024.100577
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    More about this item

    Keywords

    Central bank digital currency; Cryptocurrency; Open-economy; Financial frictions;
    All these keywords.

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • F30 - International Economics - - International Finance - - - General
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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