Predicting the Demand for Central Bank Digital Currency: A Structural Analysis with Survey Data
Jiaqi Li
Staff Working Papers from Bank of Canada
Abstract:
This paper predicts households’ demand for central bank digital currency (CBDC) with different design attributes by applying a structural demand model to a unique Canadian survey dataset. CBDC and its close alternatives, cash and demand deposits, are viewed as product bundles of different attributes. I estimate households’ preferences towards these attributes from how they allocate their liquid assets between cash and demand deposits. The estimated preferences are used to predict the demand for CBDC with a set of design attributes and quantify the impacts of CBDC design choices on CBDC demand. Under a baseline design for CBDC, the aggregate CBDC holdings out of households’ liquid assets could range from 4 to 52%, depending on whether households would perceive CBDC to be closer to cash or deposits. I find that important design attributes include budgeting usefulness, anonymity, bundling of bank services, and rate of return.
Keywords: Central bank research; Digital currencies and fintech (search for similar items in EconPapers)
JEL-codes: E58 (search for similar items in EconPapers)
Pages: 73 pages
Date: 2021-12
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac, nep-mon and nep-pay
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Citations: View citations in EconPapers (8)
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Journal Article: Predicting the demand for central bank digital currency: A structural analysis with survey data (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:21-65
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