Central bank digital currency and cryptocurrency in emerging markets

Anh H. Le

International Economics, 2025, vol. 181, issue C

Abstract: In this paper, I introduce a New Keynesian - Dynamic Stochastic General Equilibrium (NK-DSGE) model to examine the implications of CBDCs and cryptocurrency in an open economy for emerging markets. In our model, cryptocurrency is implemented as a form of deposit in banks where bankers can also receive deposits from abroad. Lastly, CBDCs are introduced as a payment and saving instrument. I find that cryptocurrency has a crucial role in banking sectors and a significant effect on the dynamic of foreign debt which is highly important for emerging markets. Moreover, I uncover that CBDCs can generate welfare gains but the gain varies with their designs.

Keywords: Central bank digital currency; Cryptocurrency; Open-economy; Financial frictions (search for similar items in EconPapers)
JEL-codes: E50 F30 F31 G15 G18 G23 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inteco:v:181:y:2025:i:c:s2110701724001008

DOI: 10.1016/j.inteco.2024.100577

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