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1. Home
2. The role of CBDC in an increasingly digital economy
THE ROLE OF CENTRAL BANK DIGITAL CURRENCY IN AN INCREASINGLY DIGITAL ECONOMY
Staff working papers set out research in progress by our staff, with the aim of
encouraging comments and debate.
Published on 13 December 2024
STAFF WORKING PAPER NO. 1,101
By Benjamin Hemingway
The introduction of an unremunerated retail central bank digital currency (CBDC)
is currently under consideration by several central banks. Motivated by the
decline in transactional cash usage and the increase in online sales in the UK,
this paper provides a theoretical framework to study the underlying drivers of
these trends and the welfare implications of introducing an unremunerated retail
CBDC. I develop a cash credit model with physical and digital retail sectors,
endogenous entry of firms and directed consumer search. Calibrating to UK data
between 2010 and 2022 the model suggests that there are positive welfare gains
from introducing an unremunerated retail CBDC, but these have likely declined
over time.
The role of central bank digital currency in an increasingly digital economy
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