CBDC and the operational framework of monetary policy

Jorge Abad, Galo Nuño and Carlos Thomas

Journal of Monetary Economics, 2025, vol. 151, issue C

Abstract: We analyze the impact of central bank digital currency (CBDC) on the operational framework of monetary policy and the macroeconomy. We develop a New-Keynesian model with a frictional interbank market, central bank deposit and lending facilities, and household preferences for different liquid assets, calibrated to the euro area. CBDC adoption implies a contraction in bank deposits, which is absorbed by a fall in reserves and, if large enough, increased recourse to central bank credit. The resulting changes in the operational framework (from ‘floor’ to ‘corridor’, and then to ‘ceiling’) thus shape the impact of CBDC on credit, investment and output.

Keywords: Central bank digital currency; Monetary policy implementation; Interbank market; Search and matching frictions; Excess reserves (search for similar items in EconPapers)
JEL-codes: E42 E44 E52 G21 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:151:y:2025:i:c:s0304393225000339

DOI: 10.1016/j.jmoneco.2025.103762

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