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Does a CBDC Reinforce Inefficiencies?
This paper examines whether a central bank digital currency (CBDC) reinforces inefficiencies in transactions with cash. In this case, the gap between the traded quantity and the welfare-maximizing one, which arises due to discounting or a suboptimal amount of money, increases further. To get some a...
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| I publikationen: | MAGKS - Joint Discussion Paper Series in Economics (Band 28-2022) |
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| Huvudupphovsman: | |
| Materialtyp: | Artikel |
| Språk: | engelska |
| Publicerad: |
Philipps-Universität Marburg
2022
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| Länkar: | PDF-fulltext |
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| Sammanfattning: | This paper examines whether a central bank digital currency (CBDC)
reinforces inefficiencies in transactions with cash. In this case, the gap between the traded quantity and the welfare-maximizing one, which arises due to discounting or a suboptimal amount of money, increases further. To get some answers, the monetary search model of Trejos and Wright (1995) is extended by a CBDC. We show that an interest-bearing CBDC reinforces inefficiencies in transactions with cash since opportunity costs for cash holders and money supply increase. Nevertheless, a CBDC is able to increase welfare as long as the share of CBDC holders is limited. |
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| Fysisk beskrivning: | 20 Seiten |
| ISSN: | 1867-3678 |
| DOI: | 10.17192/es2024.0736 |