To Demand or Not to Demand: On Quantifying the Future Appetite for CBDC

Abstract

IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Simulating the Adoption of a Retail CBDC

“…Castrén, et al (2022) introduce a rCBDC into the network of financial accounts and run scenarios to study how the banking sector would adjust and induce changes in the financial network structure. Gross and Letizia (2023) develop a simulation model that focuses on the impact on deposit rate spreads, reserve borrowing, and monetary policy pass-through. Ramadiah, et al (2021), Martens (2021), and Gross and Letizia (2023) are bottom-up approaches.…”

“…Gross and Letizia (2023) develop a simulation model that focuses on the impact on deposit rate spreads, reserve borrowing, and monetary policy pass-through. Ramadiah, et al (2021), Martens (2021), and Gross and Letizia (2023) are bottom-up approaches. In bottom-up approaches (see De Grauwe, 2010), agents use simple rules or heuristics to guide their behaviour instead of assuming that they can find the optimum under the assumptions of a complete understanding of the system and rational expectations; 7 they are "bottom-up" as the behaviour that is observed in the model is generated by the direct interactions of the agents that form the basis of the model-from the bottom of the system (Miller & Page, 2007).…”

Know Your (Holding) Limits: CBDC, Financial Stability and Central Bank Reliance

“…This makes it possible to consider how individual banks would select their preferred funding option rather than resorting to a stylised sector-level scenario analysis. Gross and Letizia (2023) provide upper bound estimates of actual CBDC take-up, under different assumptions of CBDC renumeration. This nicely complements our analysis, as we are agnostic regarding the actual take-up and rather simulate how banks might respond to different retail deposit outflows.…”

Central Bank Digital Currency and Bank Disintermediation in a Portfolio Choice Model

“…Other related papers on macroeconomic implications of CBDC, include Barrdear and Kumhof (2022), Burlon et al (2022), Keister and Sanches (2023), Brunnermeier and Niepelt (2019), Williamson (2019), Piazzesi and Schneider (2022), Garratt et al (2021), Wang and Hu (2022), Gross and Letizia (2023), Whited et al (2023), andLi et al (2023). In particular, Keister and Sanches (2023) show that by choosing a proper interest on CBDC, policymakers can ensure that CBDC introduction never decreases welfare.…”

“…They argue that in less financially developed economies, retail CBDCs can be useful for promoting financial inclusion, while in countries with high levels of financial development, CBDC can enhance financial stability by substituting out more risky non-bank e-money. Gross and Letizia (2023) develop an agent-based model where households have random utility over CBDC, cash, and deposits and calibrated to the US economy that generates more or less disintermediation depending on whether CBDC is designed to be more to deposits or to cash. Whited et al (2023) and Li et al (2023) estimate potential demand of CBDC using household data and structural choice models.…”