Could CBDC be a threat to Monetary Policy?

Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F04274644%3A_____%2F22%3A%230000946" target="_blank" >RIV/04274644:_____/22:#0000946 - isvavai.cz</a>
Result on the web
<a href="https://www.vsfs.cz/prilohy/konference_doktorandu_na_vysoke_skole_fi.pdf" target="_blank" >https://www.vsfs.cz/prilohy/konference_doktorandu_na_vysoke_skole_fi.pdf</a>
DOI - Digital Object Identifier
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Result language
angličtina
Original language name
Could CBDC be a threat to Monetary Policy?
Original language description
Central Banks are generally exposed to the Effective Lower Bound (ELB) problem when conduction Monetary Policy (MP). It is not possible for a central bank (CB) to perform MP with negative interest rates over a significant period because market participants would convert their deposits into cash if costs for conversion, storage and insurance would be lower than costs for their remunerated deposits. With many CB contemplating Central Bank Digital Currencies (CBDC), this paper discusses the effects for MP under the restriction of the ELB. Under the assumption that the CB will implement a non-remunerated tier for CBDC to provide market participants with a cash like means of payment, it can be assumed that the ELB will increase from currently approximately -1% with only cash in existence, closer to zero when implementing CBDC. This is due to the lower costs of exchange, holdings and insurance when shifting deposits into a non-renumerated tier of CBDC instead of converting into cash in times of negative interest rates. Implementation of a tier of non-remunerated CBDC creates a significant “extra buffer” for market participants with a large destabilizing effect for MP which a CB needs to consider when performing MP at the ELB.
Czech name
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Czech description
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Publication year
2022
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Article name in the collection
Konference doktorandů na Vysoké škole finanční a správní 2022: prezentace výsledků společenskovědního výzkumu s ekonomickými a finančními efekty (9. ročník) = Doctoral Students Conference at the University of Finance and Administration 2022: presentation of the results of social science research with economic and financial effects (9th annual conference)
ISBN
9788074082504
ISSN
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e-ISSN
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Number of pages
12
Pages from-to
84-95
Publisher name
Vysoká škola finanční a správní
Place of publication
Praha
Event location
Praha
Event date
Nov 15, 2022
Type of event by nationality
EUR - Evropská akce
UT code for WoS article
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