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Central bank digital currency in an open economy

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  • Ferrari Minesso, Massimo
  • Mehl, Arnaud
  • Stracca, Livio

Abstract

A two-country DSGE model with central bank digital currency (CBDC) is derived and used to analyze the open-economy implications of CBDC for the transmission of shocks, optimal monetary policy and welfare. The presence of a CBDC amplifies the international spillovers of shocks and increases international linkages. The magnitude of the effects depends crucially on the design of CBDC. Moreover, issuance of a CBDC by one economy increases asymmetries in the international monetary system by reducing monetary policy autonomy and welfare in the other economy.

Suggested Citation

  • Ferrari Minesso, Massimo & Mehl, Arnaud & Stracca, Livio, 2022. "Central bank digital currency in an open economy," Journal of Monetary Economics, Elsevier, vol. 127(C), pages 54-68.
    • Handle: RePEc:eee:moneco:v:127:y:2022:i:c:p:54-68
    DOI: 10.1016/j.jmoneco.2022.02.001
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    More about this item

    Keywords

    Central bank digital currency; DSGE model; Open-economy; Optimal monetary policy; International monetary system;
    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

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