How Central Bank Digital Currency Design Choices Impact Monetary Policy Pass-Through and Market Composition

Redesigning the eNaira central bank digital currency (CBDC) for payments and macroeconomic effectiveness

“…Maniff (2020) argues that a central bank digital currency complements cash and will not replace cash. Garratt, Yu and Zhu (2022) show that CBDC can offer payment convenience and it interacts with the monetary benefits of interest payments. They also argue that increasing CBDC convenience value can strengthen the transmission of monetary policy.…”

Central Bank Digital Currency and Financial Inclusion

“…This paper contributes to the emerging literature on CBDCs (Infante et al, 2022;IMF, 2021;Soderberg et al, 2022;Adrian and Mancini-Griffoli, 2019;Adrian et al, 2022). Specifically, we build on the literature focused on the impact of CBDC on the banking sector (Andolfatto, 2021, Keister and Sanches, 2022, Chiu et al, 2022, Whited et al, 2022, Garratt et al, 2022, Piazzesi and Schneider, 2020, Agur et al, 2022, Chang et al, 2023. Our paper is novel in that we incorporate the implications of financial inclusion via incentivizing consumers to open bank accounts and reducing credit-risk information asymmetry in studying the potential impact of CBDC for bank lending and disintermediation.…”

“…1 The most frequently raised concern in the CBDC discussion is the potential risk of bank disintermediation and contraction in the overall supply of credit if the issuance of CBDC results in bank deposits flowing quickly into CBDC accounts (Carapella and Flemming, 2020;Mancini-Griffoli et al, 2018). As summarized by Infante et al (2022), the literature research studying the effects of CBDC on the banking sector (Andolfatto, 2021, Keister and Sanches, 2022, Chiu et al, 2022, Whited et al, 2022, Garratt et al, 2022, Piazzesi and Schneider, 2020 has focused on four main factors: the competitiveness of the banking sector, CBDC remuneration, wholesale funding, and CBDC account limits.…”

Central Bank Digital Currency Adoption: A Two-Sided Model

“…We are the first to develop a (two-sided payment) model to study both households and firms together. On the household side, our paper is related to the strand of research focused on the disintermediation impact of CBDC (Andolfatto, 2021, Keister and Sanches, 2022, Chiu et al, 2022, Whited et al, 2022, Garratt et al, 2022, Piazzesi and Schneider, 2020, Agur et al, 2022, Chang et al, 2023, Tan, 2023. 9…”