Implications of Central Bank Digital Currencies for Monetary Policy Transmission

Fintech Notes, September 15, 2023

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Canonical URL: Implications of Central Bank Digital Currencies for Monetary Policy Transmission

Authors: Mitali Das, Tommaso Mancini-Griffoli, Fumitaka Nakamura, Julia Otten, Gabriel Soderberg, Juan Sole, Brandon Joel Tan
Published: September 15, 2023
Series: Fintech Notes
DOI: https://doi.org/10.5089/9798400252792.063

Authors: Mitali Das, Tommaso Mancini-Griffoli, Fumitaka Nakamura, Julia Otten, Gabriel Soderberg, Juan Sole, Brandon Joel Tan
Date: September 15, 2023
Purpose: Presents an analysis of the implications of central bank digital currency (CBDC) issuance for monetary policy, distinguishing between "level effects" and "transmission effects."

CBDC implications for monetary policy are intermediated by CBDC's impact on key parts of the macroeconomic environment.
Distinction between:
- "Level effects" — the introduction of CBDCs could tighten or loosen financial conditions as a shock.
- "Transmission effects" — CBDCs change the impact of a given monetary policy shock on output, employment, and inflation.

In general, the effects of CBDCs on monetary policy transmission are expected to be relatively small in normal times.
These effects can be more significant in environments with low interest rates or financial market stress.

Subjects: Bank deposits, Central Bank digital currencies, Central bank policy rate, Central Banks, Economic sectors, Financial inclusion, Financial markets, Financial services, Open market operations, Technology
Keywords: Bank deposits, CBDC issuance, Central bank digital currencies, Central bank policy rate, Financial inclusion, FINTECH note, Global, IMF Fintech Note 2023/010, monetary policy, monetary policy transition, monetary policy transmission, Open market operations