Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/278852 
Year of Publication: 
2023
Series/Report no.: 
IZA Discussion Papers No. 16154
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
We develop a general equilibrium model that highlights the trade-offs between physical and digital forms of retail central bank money. The key differences between cash and central bank digital currency (CBDC) include transaction efficiency, possibilities for tax evasion, and, potentially, nominal rates of return. We establish conditions under which cash and CBDC can co-exist and show how government policies can in uence relative holdings of cash, CBDC, and other assets. We illustrate how a CBDC can facilitate negative nominal interest rates and helicopter drops, and also how a CBDC can be structured to prevent capital flight from other assets.
Subjects: 
central bank digital currency
cash
medium of exchange
store of value
transaction efficiency
JEL: 
E4
E5
E61
Document Type: 
Working Paper

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