Is CBDC strengthening the monetary transmission mechanism?

Pál Péter Kolozsi, Kristóf Lehmann and Zoltán Szalai

Chapter 4 in Central Banking, Monetary Policy and the Future of Money, 2022, pp 94-119 from Edward Elgar Publishing

Abstract: Our chapter provides a concise review of the literature on the possible impact of digital central bank currencies on the transmission of monetary policy. We look at the potential challenges from both mainstream and broad post-Keynesian perspectives. We find that the latter provides more realistic and useful framework for analysing the question, just as it does for analysing a modern monetary production economy in general. We conclude that digital central bank currency is not in principle indispensable for the stated aims like financial inclusion, providing safe retail saving instruments or implementing non-conventional monetary policy. These could have been provided before if there were a will for that. Digitalisation nonetheless provides cheaper and more handy means for providing them in a society increasingly using digital instruments and when the supply of digital financial instruments offered by private sector could lead to declining use of traditional central bank currency.

Keywords: Economics and Finance; Politics and Public Policy (search for similar items in EconPapers)
Date: 2022
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