Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/266026 
Authors: 
Year of Publication: 
2022
Series/Report no.: 
MAGKS Joint Discussion Paper Series in Economics No. 28-2022
Publisher: 
Philipps-University Marburg, School of Business and Economics, Marburg
Abstract: 
This paper examines whether a central bank digital currency (CBDC) reinforces inefficiencies in transactions with cash. In this case, the gap between the traded quantity and the welfare-maximizing one, which arises due to discounting or a suboptimal amount of money, increases further. To get some answers, the monetary search model of Trejos and Wright (1995) is extended by a CBDC. We show that an interest-bearing CBDC reinforces inefficiencies in transactions with cash since opportunity costs for cash holders and money supply increase. Nevertheless, a CBDC is able to increase welfare as long as the share of CBDC holders is limited.
Subjects: 
CBDC
inefficiencies
welfare analysis
JEL: 
E31
E41
E51
Document Type: 
Working Paper

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