|Lee, Yuen Hung Kevin
|Can central bank digital currency achieve the optimal negative interest rate policy?
|Tong, Wilson (AF)
Chen, Xiaojun (AMA)
|Banks and banking, Central
Hong Kong Polytechnic University -- Dissertations
|Faculty of Business
|vi, 123 pages : color illustrations
|The practical significance of central bank digital currency (CBDC) continues to emerge, and many countries are actively conducting investigation and empirical experiments on CBDC. China, Europe and the United States are also promoting different approaches of central bank digital currency in an orderly manner. My thesis constructs a closed Keynesian DSGE model which adopts the calibration method and analyzes the results of the model with and without the central bank digital currency issuance, compares and analyzes the transmission mechanism of the interest rate rule through the impulse response.
First of all, my thesis selects some representative digital currency literatures for a detailed exposition and study. On this basis, I introduce the characteristics and operating mechanism of the CBDC, and theoretically analyze the economic influence on the CBDC on monetary policy. Then, my thesis establishes a closed Keynesian DSGE model including households, financial intermediaries, manufacturers and central banks which combines the real European economic data to study the monetary effects of issuing CBDC. In my DSGE model, it is found that after the issuance of the CBDC, the transmission of interest rate policy becomes more positive and effective, especially in the negative interest rate policy which is more efficient, resulting in a significant increase in the level of consumption and investment. After the issuance of the CBDC, due to the reduction of 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 level of output.
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