The macroeconomic effects of introducing a central bank digital currency by Pascal Paul, Mauricio Ulate, Jing Cynthia Wu published by VOXEU (7/2025).
Central bank digital currencies are gaining traction as a potential innovation in central banking, with numerous countries considering their implementation. However, given the limited real-world experience with such currencies, researchers and policymakers depend on theoretical analysis to assess their potential. This column presents a new macroeconomic model that reveals significant welfare gains from introducing central bank digital currencies, particularly those that offer interest. Despite the stronger interest in such currencies in Europe, the potential welfare gains may be even higher for the US.