Central bank digital currency and monetary policy

Joshua Yindenaba Abor, James Atambilla Abugre and Christopher J. Green

Chapter 23 in The Elgar Companion to Financial Economics, 2025, pp 430-454 from Edward Elgar Publishing

Abstract: This chapter explores the intricate relationship between Central Bank Digital Currencies (CBDCs) and monetary policy, examining how these digital currencies, issued and regulated by central banks, can reshape traditional mechanisms for achieving economic stability. The chapter begins by providing an overview of CBDCs and discusses the evolution of monetary systems. It explores the mechanics of monetary policy and how CBDCs fit into the existing framework, followed by an analysis of the impact of CBDCs on monetary policy, and the challenges and risks of CBDCs. The chapter examines CBDCs and central bank independence and presents some cases on CBDCs and monetary policy. It also provides future prospects and concludes with policy recommendations for the design and implementation of CBDCs that support monetary policy objectives while maintaining financial system resilience.

Keywords: Central bank; Digital currency; Monetary policy; Financial technology; Financial stability (search for similar items in EconPapers)
Date: 2025
ISBN: 9781035341399
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