Designing Central Bank Digital Currencies

By Itai Agur, Anil Ari, Giovanni Dell'Ariccia. Journal of Monetary Economics, 2019

339 citations recorded by the source corpus.

We study the optimal design of a central bank digital currency (CBDC) in an environment where agents sort into cash, CBDC and bank deposits according to their preferences over anonymity and security; and where network effects make the convenience of payment instruments dependent on the number of their users. CBDC can be designed with attributes similar to cash or deposits, and can be interest-bearing: a CBDC that closely competes with deposits depresses bank credit and output, while a cash-like CBDC may lead to the disappearance of cash. Then, the optimal CBDC design trades off bank intermediation against the social value of maintaining diverse payment instruments. When network effects matter, an interest-bearing CBDC alleviates the central bank's tradeoff.

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Citations in the corpus

Rise of the Central Bank Digital Currencies: Drivers, Approaches and Technologies (2020, unknown): “There is also work on policy design frameworks (Davoodalhosseini and Rivadeneyra (2020), Agur et al (2019), Allen et al (2020)), their implications for cross-country payments (Milkau (2019)), implications for the international role of currencies (Ferrari et al (2020) and legal aspects of their…”
Should Central Banks Issue Digital Currency? (2019, background): “1 Early discussions were offered by Ali et al. (2014), Broadbent (2016), Fung and Halaburda (2016) and Skingsley (2016), among others.”