Retail CBDC and U.S. Monetary Policy Implementation: A Stylized Balance Sheet Analysis

Matthew Malloy, Francis Martinez, Mary-Frances Styczynski and Alex Thorp

No 2022-032, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper discusses how a Federal Reserve issued retail central bank digital currency (CBDC) could affect U.S. monetary policy implementation. Using a stylized balance sheet analysis, we analyze the effect a retail CBDC could have on the balance sheets of the Federal Reserve, commercial banks, and U.S. households. Then we consider how these balance sheet changes could affect monetary policy implementation for the Federal Reserve. We illustrate that the potential effects on monetary policy implementation from a retail CBDC are highly dependent on the initial conditions of the Federal Reserve’s balance sheet. Moreover, the analysis demonstrates how the Federal Reserve may use its existing tools to manage the effects of a retail CBDC on monetary policy implementation.

Keywords: Bank behavior; Central banking; Households; Monetary policy implementation; Retail CBDC (search for similar items in EconPapers)
Pages: 17 p.
Date: 2022-05-31
New Economics Papers: this item is included in nep-ban, nep-cba, nep-fmk, nep-mac, nep-mon and nep-pay
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2022-32

DOI: 10.17016/FEDS.2022.032

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