Publikationsserver
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...
Saved in:
| Published in: | MAGKS - Joint Discussion Paper Series in Economics (Band 28-2022) |
|---|---|
| Main Author: | |
| Format: | Article |
| Language: | English |
| Published: |
2022
|
| Subjects: | |
| Online Access: | PDF Full Text |
| Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
| Summary: | 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. |
|---|---|
| Physical Description: | 20 Pages |
| ISSN: | 1867-3678 |
| DOI: | 10.17192/es2024.0736 |