On the demand for various CBDC designs: A quantitative decomposition of currency spill-over based on the complementary role

Xuanyu Zhang and Xiaoyun Fan

International Review of Economics & Finance, 2025, vol. 103, issue C

Abstract: We study various Central Bank Digital Currency (CBDC) designs, focusing on money substitution and spill-over effects from the household demand perspective. We provide a predictive framework that quantitatively decomposes money demand into effects caused by currency substitution and complementary characteristics. This quantitative analysis provides insights into the stability of CBDC substitution, optimal consumption patterns, and the effectiveness of standard monetary policy. The calibrated results partially align with existing literature, suggesting that demand for the cash-like CBDC designs promotes aggregate consumption and output, whereas the deposit-like designs may be perceived as a better store of value. We construct a spill-over-adjusted marginal consumption of CBDC growth, which shows that the cash-like designs serve as a more efficient complement to traditional money.

Keywords: CBDC; Monetary policy; Money demand; Substitution effect; Spill-over effect; Complementarity (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:103:y:2025:i:c:s1059056025006215

DOI: 10.1016/j.iref.2025.104458

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