Designing Central Bank Digital Currencies

67 Pages Posted: 3 Nov 2020

See all articles by Itai Agur

Itai Agur

IMF

Anil Ari

International Monetary Fund

Giovanni Dell'Ariccia

International Monetary Fund (IMF) - Research Department; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: October 2020

Abstract

We study the optimal design of a central bank digital currency (CBDC) in an environment where agents sort into cash, CBDC, and bank deposits according to their preferences over anonymity and security; and where network effects make the convenience of a payment instrument depend on the number of its users. A CBDC can be designed with attributes similar to cash or deposits, and can be interest bearing: a CBDC that closely competes with deposits depresses bank credit and output, while a cash-like CBDC may lead to the disappearance of cash. Then, the optimal CBDC design trades of bank intermediation against the social value of maintaining diverse payment instruments. When network effects matter, an interest-bearing CBDC alleviates the central bank's tradeoffs.

Keywords: CBDC, digital currency, Financial Intermediation, Fintech, network effects

JEL Classification: E41, E58, G21

Suggested Citation

Agur, Itai and Ari, Anil and Dell'Ariccia, Giovanni, Designing Central Bank Digital Currencies (October 2020). CEPR Discussion Paper No. DP15366, Available at SSRN: https://ssrn.com/abstract=3723555

Itai Agur (Contact Author)

IMF ( email )

700 19th Street NW
Washington, DC 20431
United States

HOME PAGE: http://itaiagur.weebly.com/

Anil Ari

International Monetary Fund ( email )

700 19th Street NW
Washington, DC 20431
United States

HOME PAGE: http://https://sites.google.com/site/anlari/

Giovanni Dell'Ariccia

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-8135 (Phone)
202-623-4352 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
1
Abstract Views
175
PlumX Metrics