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Digital Money and Central Bank Operations
Author:
Mr. Charles M. Kahn https://isni.org/isni/0000000404811396 International Monetary Fund

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Mr. Manmohan Singh
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Jihad Alwazir
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Series:
IMF Working Papers
Volume/Issue:
Volume 2022: Issue 085
Language:
English
Publication Date:
06 May 2022
DOI:
https://doi.org/10.5089/9798400206955.001
ISBN:
9798400206955
ISSN:
1018-5941
Pages:
23
Keywords:
Base money; CBDC; central banking operations; currency in circulation; digital money; mobile phone operators; seigniorage; central bank operations Charles Kahn; jihad Alwazir; lender-of-last-resort facilities; payments assets; phone company payments account; central bank profits; central bank regulation; Monetary base; Digital currencies; Central Bank digital currencies; Currencies; Commercial banks
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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The rise of new and proposed monetary vehicles, including CBDC, stablecoins, payment service providers etc., are unprecedented. An important question for central banks is the extent to which these innovations upend the role of and implementation of monetary policy. The paper focuses on the interest rate channel and if digital money (especially CBDC) will change monetary policy and central bank operations. We argue that new policy instruments make sense only to the extent that there is limited substitutability between the various payment sectors. We analyze trends in currency-in-circulation, and how it may impact central bank’s seigniorage, monetary base, and transactional velocity of digital money if money demand declines. Liquidity outside the monetary base will also be important to understand.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund