MONETARY POLICY STRATEGY IN THE PRESENCE OF CENTRAL BANK DIGITAL CURRENCY

Ferry Syarifuddinn () and Toni Bakhtiar
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Ferry Syarifuddinn: Bank Indonesia

No WP/09/2021, Working Papers from Bank Indonesia

Abstract: With their various motivations, many central banks still develop CBDC to explore its potentials and the drawback of implementation. This research examines the macroeconomic and monetary policy consequences, then determine optimal CBDC design to support monetary policy strategy. First, this research wants to develop DSGE model to quantify macroeconomic and monetary policy consequences in implementing CBDC. The DSGE model is consist of seven sectors namely households, retail firms, wholesale firms, capital producing firms, banks, central bank, and government. Shock generator that used in this model is technology shock and the shock on Taylor rule of interest rate. Second, as we know the outcome of the consequences, we continue to determine optimal CBDC design using SWOT with purposive sampling meta-analysis approach and its implementation strategies. According to the simulation, CBDC could effectively maintain inflation through CBDC rate. Meanwhile, optimal CBDC design that could support monetary policy is retail and wholesale coverage, interest bearing (wholesale) and non-interest bearing (retail) remuneration, account-based and tokenbased payment system, traceable degree of anonymity, hybrid architecture, DLT ledger system, and domestic and cross-border scope.

Keywords: CBDC; Optimal design; DSGE; SWOT; Monetary policy (search for similar items in EconPapers)
JEL-codes: E42 E44 E52 E58 G21 (search for similar items in EconPapers)
Pages: 128 pages
Date: 2021
New Economics Papers: this item is included in nep-dge, nep-mon, nep-pay and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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http://publication-bi.org/repec/idn/wpaper/WP092021.pdf First version, 2021 (application/pdf)

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