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Central Bank Digital Curr al Bank Digital Currency, Monetar , Monetary Policy, and Macroeconomy : Centr oeconomy : Central Bank Digital Curr al Bank Digital Currency, Monetar , Monetary Policy, and Macroeconomy

Author

Listed:
  • Syahid Izzulhaq

    (Diponegoro University, Indonesia)

  • Akhmad Syakir Kurnia

    (Diponegoro University, Indonesia)

  • Johan Beni Maharda

    (Diponegoro University, Indonesia)

Abstract

This paper studies the impact of a universally accessible interest-bearing Central Bank Digital Currency (CBDC) on macroeconomic stability and monetary policy in Indonesia. We construct a simple reduced-form New Keynesian model calibrated with monthly data for Indonesia from July 2005 to February 2022. We find that the CBDC regime significantly improves macroeconomic stability in Indonesia. In this regard, the CBDC rate, as an additional monetary policy instrument, responsively reacts to macroeconomic fluctuations and significantly impacts the demand side. Our results also suggest that monetary policy is more effective under the CBDC regime than under the non-CBDC.

Suggested Citation

  • Syahid Izzulhaq & Akhmad Syakir Kurnia & Johan Beni Maharda, 2024. "Central Bank Digital Curr al Bank Digital Currency, Monetar , Monetary Policy, and Macroeconomy : Centr oeconomy : Central Bank Digital Curr al Bank Digital Currency, Monetar , Monetary Policy, and Macroeconomy," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 27(2), pages 241-264, May.
    • Handle: RePEc:idn:journl:v:27:y:2024:i:2c:p:241-264
    DOI: https://doi.org/10.59091/2460-9196.2273
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    References listed on IDEAS

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    1. Agur, Itai & Ari, Anil & Dell’Ariccia, Giovanni, 2022. "Designing central bank digital currencies," Journal of Monetary Economics, Elsevier, vol. 125(C), pages 62-79.
    2. Bastian Muzbar Zams & Ratih Indrastuti & Akhmad Ginulur Pangersa & Nur Annisa Hasniawati & Fatimah Az Zahra & Indah Ayu Fauziah, 2020. "Designing Central Bank Digital Currency for Indonesia: The Delphi–Analytic Network Process," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 23(3), pages 411-438, October.
    3. Novi Maryaningsih & Suahasil Nazara & Febrio N. Kacaribu & Solikin M. Juhro, 2022. "Central Bank Digital Currency: What Factors Determine Its Adoption?," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 25(1), pages 1-24, June.
    4. Morten Linnemann Bech & Rodney Garratt, 2017. "Central bank cryptocurrencies," BIS Quarterly Review, Bank for International Settlements, September.
    5. Fouejieu, Armand & Popescu, Alexandra & Villieu, Patrick, 2019. "Trade-offs between macroeconomic and financial stability objectives," Economic Modelling, Elsevier, vol. 81(C), pages 621-639.
    6. 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.
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