Designing Central Bank Digital Currencies
IMF Working Papers, November 18, 2019
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- Designing Central Bank Digital Currencies
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Bibliographic details
- Authors: Itai Agur, Anil Ari, Giovanni Dell'Ariccia
- Published: November 18, 2019
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513519883.001
Core framework and mechanisms
- Agents sort into cash, CBDC and bank deposits according to their preferences over anonymity and security.
- 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.
Key findings
- A CBDC that closely competes with deposits depresses bank credit and output.
- A cash-like CBDC may lead to the disappearance of cash.
- 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 between preserving bank intermediation and payment-instrument diversity.
Policy implications and design trade-offs
- Central banks face a trade-off between supporting bank intermediation (to sustain bank credit and output) and preserving a diversity of payment instruments (including cash).
- Designing CBDC attributes (cash-like vs deposit-like) and whether to make CBDC interest-bearing are central policy levers to manage that trade-off.
- Consideration of network effects is important: if convenience depends on user adoption, an interest-bearing CBDC can mitigate negative effects on bank intermediation.
Publication and metadata (exact)
- Authors: Itai Agur, Anil Ari, Giovanni Dell'Ariccia
- Publication date: November 18, 2019
- Series: Working Paper No. 2019/252
- Issue: 252
- Volume: 2019
- Pages: 38
- DOI: https://doi.org/10.5089/9781513519883.001
- Stock No: WPIEA2019252
- ISBN: 9781513519883
- ISSN: 1018-5941
- Subjects: Bank deposits, Banking, Central Bank digital currencies, Currencies, Deposit rates, Financial markets, Financial services, Money, Payment systems, Technology
- Keywords: Bank deposits, cash equilibrium, cash holder, CBDC design, CBDC interest rate, CBDC rate, CBDC risk, central bank, Central Bank digital currencies, Currencies, Deposit rates, interest rate, interest-bearing CBDC, market power, Payment systems, WP
Source: IMF Working Papers — "Designing Central Bank Digital Currencies" by Itai Agur, Anil Ari, and Giovanni Dell'Ariccia, November 18, 2019.
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