Kingdom of Bahrain: Selected Issues
IMF Staff Country Reports, September 18, 2023
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- Kingdom of Bahrain: Selected Issues
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Bibliographic details
- Published: September 18, 2023
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798400254581.002
Overview
- Presents a counterfactual analysis of financial system effects from introducing a Central Bank Digital Currency (CBDC) in Bahrain.
- Uses a model specifically calibrated and estimated for Bahrain to quantify potential impacts on the financial system and monetary policy transmission.
- Context: Bahrain has made significant strides in fintech and adoption of digital payments.
Key findings
- A CBDC's perceived utility by the population is key for wide adoption.
- High adoption and remuneration of a CBDC can enhance monetary policy transmission.
- High adoption and remuneration may also imply a drag on banking system profitability.
- CBDC introduction strengthens monetary policy pass-through, and this strengthening is greater if the CBDC were remunerated.
- A careful and analytically informed design could enhance adoption while limiting risks to financial stability.
Policy implications and recommendations
- Prioritize design choices that raise perceived utility to encourage wide adoption.
- Consider remuneration design carefully: remuneration can improve monetary policy pass-through but may weaken banking profitability.
- Balance objectives of enhanced monetary policy transmission against potential risks to financial stability and bank profitability through targeted design measures.
Methodology and scope
- Analysis is counterfactual and model-based.
- Model is specifically calibrated and estimated for Bahrain.
- Focuses on effects for the financial system and monetary policy transmission.
Subjects and keywords highlighted
- Subjects: Bank deposits, Central Bank digital currencies, Central bank policy rate, Commercial banks, Deposit rates, Financial institutions, Financial services, International organization, Monetary policy, Technology.
- Keywords: Bank deposits, base utility, Central Bank digital currencies, Central bank policy rate, Commercial banks, counterfactual simulation result, Deposit rates, design choice, dynamics in Bahrain, financial system effect, Global, lower bound scenario, model parameterization.
IMF Staff Country Report No. 2023/333 — Kingdom of Bahrain: Selected Issues (September 18, 2023).
Content in this bundle
- Kingdom of Bahrain: Selected Issues; IMF Country Report No. 23/333; June 20, 2023