The impact of central bank digital currency on monetary policy – expert analysis

Changing the Monetary Policy Transmission Mechanism in the Context of Central Bank Digital Currency (CBDC) Introduction

Introducing Central Bank Digital Currency (CBDC) into the economy is a process that significantly affects the transmission of monetary policy. Designing CBDC involves issues such as interchangeability with bank deposits and whether it bears interest. Research on introducing CBDC is conducted using a general equilibrium model with nominal rigidities, liquidity constraints, and a banking sector where commercial banks operate under a leverage limit.

The Significance of CBDC and Bank Deposits as Means of Payment

In a model where CBDC and bank deposits can be used as means of payment, it is important to ensure liquidity services for households. Banks issue deposits and extend credit to firms, with bank deposits being backed by loans and central bank reserves.

Strengthening Monetary Policy Effects through CBDC Introduction

Studies have shown that introducing CBDC with a fixed interest rate enhances the effects of classical monetary policy shocks. For instance, a change in the Taylor rule, governing central bank reserve interest rates, can be reinforced by the presence of CBDC.

Overall, the introduction of CBDC can lead to an increase or decrease in the economy’s response depending on the type of shock – for example, an interest rate shock or a reserve quantity shock. It has also been noted that the economy’s response depends on the framework of monetary policy, whether the central bank operates through reserves or through CBDC, as well as on the central bank balance sheet rules regulating the amount of CBDC and reserves.

Introducing central bank digital currency is a comprehensive process that can revolutionize the functioning of the economy and bring about new dynamic changes in monetary policy. Through proper design and understanding of CBDC mechanisms, it is possible to achieve positive effects for economic stability and the realization of monetary policy goals.