Broadening Narrow Money: Monetary Policy with a Central Bank Digital Currency

Meaning, Jack; Dyson, Ben; Barker, James; Clayton, Emily

doi:10.2139/ssrn.3180720

Cited by 126 publications

(101 citation statements)

References 15 publications

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“…Now we move to total output, which is shown in the third graph in the first row. 32 The pattern is qualitatively similar to loans: as i e increases, total output first increases and then decreases. Quantitatively, there are two differences.…”

Section: Effects On Total Output and Welfarementioning

confidence: 77%

Central Bank Digital Currency and Banking

et al. 2019

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One frequently raised concern about a central bank digital currency (CBDC) is that it is likely to compete with bank deposits as a means of payment and therefore increase private banks' funding costs and induce disintermediation. We develop a micro-founded general equilibrium model with money and banking to evaluate this concern both theoretically and quantitatively. We find that when banks have market powers in the deposit market, introducing a CBDC that competes with bank deposits as a means of payment can compel banks to raise the deposit rate and expand bank intermediation and output. The model calibrated to the U.S. economy suggests that a CBDC with a proper interest rate can raise bank lending by 3.55% and output by 0.50%. We also use the framework to evaluate other dimensions of the CBDC design, including acceptability, eligibility as reserves and the rule of supply, and assess the role of a CBDC as the economy becomes increasingly cashless.

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Section: Effects On Total Output and Welfarementioning

confidence: 77%

Central Bank Digital Currency and Banking

et al. 2019

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“…The principles include 1) CBDC pays an adjustable interest rate, 2) CBDC and reserves are not convertible, 3) no guaranteed convertibility of bank deposits into CBDC at commercial banks, 4) central bank issues CBDC only against eligible securities. Meaning et al (2018) explore the implications of CBDC on the monetary transmission mechanism-how a change in policy instruments leads to change in the path to the real economy. The paper argues that universally accessible, interest-bearing, account-based CBDC can be used for monetary policy as central bank reserves are now.…”

Section: Including Central Bank Digital Currencies and The Shift To Amentioning

confidence: 99%

Fintech and the Future of Financial Services: What Are the Research Gaps?

Kavuri¹,

Milne²

2019

SSRN Journal

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New financial technologies (FinTech) have erupted around the world. Consequently, there has been a considerable increase in academic literature on FinTech over the last five years. Research tends to be scantily connected with no coherent research agenda. Significant research gaps and important questions remain. There is much work to be done before this area becomes an established academic discipline. This paper offers coherent research themes formulated through focus group meetings with policymakers and academics, and also based on a critical assessment of the literature. We outline seven key research gaps with questions that could form the basis of academic study. If these are addressed it would help this area become an established academic discipline. AbstractNew financial technologies (FinTech) have erupted around the world.Consequently, there has been a considerable increase in academic literature on FinTech over the last five years. Research tends to be scantily connected with no coherent research agenda. Significant research gaps and important questions remain. There is much work to be done before this area becomes an established academic discipline. This paper offers coherent research themes formulated through focus group meetings with policymakers and academics, and also based on a critical assessment of the literature. We outline seven key research gaps with questions that could form the basis of academic study. If these are addressed it would help this area become an established academic discipline.

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“…And if interest was paid on those central bank balances, individuals would have an incentive to do so in response to changes in the policy interest rate. Commercial banks would more quickly see the impact of the change in the policy rate on their funding costs, increasing the speed of pass-through from the policy rate to other interest rates (Meaning, Dyson, Barker and Clayton 2018). If a given change in the policy rate elicited a larger shift away from commercial bank retail deposits, the size of the induced change in lending rates might be accentuated.…”

Section: Central Bank Digital Currencymentioning

confidence: 99%

From Commodity to Fiat and Now to Crypto: What Does History Tell Us?

Eichengreen

2019

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Over time, there has been a tendency for political jurisdictions and residents to converge on a single currency. Monopoly over seigniorage is a source of political power and a valuable lifeline when sovereignty is threatened. Moreover a uniform currency, insofar as it is free of counterparty and liquidity risk, facilitates economic activity. But will digital currencies now reverse this trend toward uniformity, given the apparent ease with which they can be created? The information sensitivity of those units, evident in the fact that they trade at varying prices, suggests that they do not yet provide the core functions of money. So-called stable coins are intended to bridge this gap, but whether they can be successfully scaled up and maintain their stability is doubtful. The one unit that can clearly meet these challenges is central bank digital currency. But there would be both costs and benefits of moving in this direction.

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Broadening Narrow Money: Monetary Policy with a Central Bank Digital Currency

Cited by 126 publications

References 15 publications

Central Bank Digital Currency and Banking

Central Bank Digital Currency and Banking

Fintech and the Future of Financial Services: What Are the Research Gaps?

From Commodity to Fiat and Now to Crypto: What Does History Tell Us?

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