Central bank digital currency in an open economy

Massimo Ferrari Minesso, Arnaud Mehl and Livio Stracca

No 2488, Working Paper Series from European Central Bank

Abstract: We examine the open-economy implications of the introduction of a central bank digital currency (CBDC).We add a CBDC to the menu of monetary assets available in a standard two-country DSGE model with financial frictions and consider a broad set of alternative technical features in CBDC design. We analyse the international transmission of standard monetary policy and technology shocks in the presence and absence of a CDBC and the implications for optimal monetary policy and welfare. The presence of a CBDC amplifies the international spillovers of shocks to a significant extent, thereby increasing international linkages. But the magnitude of these effects depends crucially on CBDC design and can be significantly dampened if the CBDC possesses specific technical features. We also show that domestic issuance of a CBDC increases asymmetries in the international monetary system by reducing monetary policy autonomy in foreign economies. JEL Classification: E50, F30

Keywords: central bank digital currency; DSGE model; international monetary system; open-economy; optimal monetary policy (search for similar items in EconPapers)
Date: 2020-11
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mon, nep-opm and nep-pay
Note: 501438
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (28)

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Related works:
Journal Article: Central bank digital currency in an open economy (2022)
Working Paper: Central bank digital currency in an open economy (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20202488

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