The Macroeconomics Of Central Bank Issued Digital Currencies

The practical significance of fiat digital currencies continues to emerge,and countries are actively conducting research and development of fiat digital currencies.China is also advancing the research and development of legal digital currency in a solid and orderly manner.How to maximize the overall economic benefits and social welfare is the core proposition of legal digital currency research and development.The article first selects more representative digital currency for detailed elaboration.On this basis,the article introduces the characteristics and operating mechanism of central bank issued digital currencies,and theoretically analyzes the economic impact of legal digital currency on payment and settlement efficiency and monetary policy.Then it establishes a dynamic stochastic general equilibrium covering four sectors,including households,financial investors,unions and banks,and a government that determines fiscal and monetary policies.The model(DSGE)combines the economic realities of China to analyze the macroeconomic consequences of issuing central bank digital currency(CBDC).In the DSGE model,we found that after issuing CBDC,the output level increased.With the issuance of central bank issued digital currencies,due to the reduction of currency transaction costs,the reduction of tax rates and the increase of currency transaction balances,the consumption and investment of households and financial investors increased,which in turn increased the output level.At the same time,we found that counter-cyclical CBDC price rules or quantity rules,as the second monetary policy tool,can greatly improve the central bank’s ability to stabilize the business cycle.