Should Central Banks Issue Digital Currency?

【Author】 Keister, Todd; Sanches, Daniel

【Source】REVIEW OF ECONOMIC STUDIES

【Abstract】We study how introducing a central bank digital currency affects equilibrium allocations and welfare in an environment where both currency and bank deposits are used in exchange. We highlight an important policy tradeoff: while a digital currency tends to improve efficiency in exchange, it may also crowd out bank deposits, raise banks' funding costs, and decrease investment. We derive conditions under which targeted digital currencies, which compete only with physical currency or only with bank deposits, raise welfare. If such targeted currencies are infeasible, we illustrate the policy tradeoffs that arise when issuing a single, universal digital currency.

【Keywords】Digital currency; Public vs; private money; Liquidity premium; Monetary policy; Disintermediation; E42; E58; G28

【收录时间】2022-08-16

【文献类型】Article; Early Access

【论文大主题】FT50 / UTD24

【论文小主题】技术影响与价值

【影响因子】7.833