Central bank digital currency and monetary policy

Many central banks are contemplating whether to issue a bank digital currency (CBDC). A CBDC has certain potential benefits, including the possibility that it can bear interest. However, using is costly for agents. I study optimal monetary policy when only cash, CBDC, or both cash and available If cost of not too high, more efficient allocations be implemented by than first best achieved. Having may result in lower welfare cases where available. The gains introducing estimated under various scenarios United States Canada. For example, if relative around 0.25% transaction value, lead an increase 0.12–0.21% consumption 0.04–0.07%