FEDS Paper: The Macroeconomic Implications of CBDC: A Review of the Literature

Federal Reserve News for Investors and Traders

November 2022

The Macroeconomic Implications of CBDC: A Review of the Literature

Sebastian Infante, Kyungmin Kim, Anna Orlik, André F. Silva, and Robert J. Tetlow


This paper provides an overview of the literature examining how the introduction of a CBDC would affect the banking sector, financial stability, and the implementation and transmission of monetary policy in a developed economy such as the United States. A CBDC has the potential to improve welfare by reducing financial frictions in deposit markets, by boosting financial inclusion, and by improving the transmission of monetary policy. However, a CBDC also entails noteworthy risks, including the possibility of bank disintermediation and associated contraction in bank credit, as well as potential adverse effects on financial stability. A CBDC also raise important questions regarding monetary policy implementation and the footprint of central banks in the financial system. Ultimately, the effects of a CBDC depend critically on its design features, particularly remuneration.

Keywords: Financial stability, Monetary policy, banking, central bank digital currency, central banking

DOI: https://doi.org/10.17016/FEDS.2022.076

PDF: Full Paper

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