CENTRAL BANK DIGITAL CURRENCY: WHAT FACTORS DETERMINE ITS ADOPTION?
This paper attempts to explain the differences in Central Bank Digital Currency (CBDC) adoption across emerging and advanced countries using an ordered probit model. Based on a cross-country dataset, we show that wholesale CBDC is more advanced in countries with developed financial markets and greater cross-border transactions. Retail CBDC is more advanced in countries with lower financial inclusion and a large informal economy. We further show that different factors affect retail CBDC adoption across emerging and advanced countries. However, cross-border transactions are the most crucial factor influencing wholesale CBDC adoption across emerging and advanced countries.
An, J., Hou, W., & Lin, C. (2022). Epidemic Disease and Financial Development. Journal of Financial Economics, 143, 332–358.
Agur, I., Ari, A., & Dell’Ariccia, G. (2021). Designing Central Bank Digital Currencies. Journal of Monetary Economics.
Alfonso, V., Boar, C., Frost, J., Gambacorta, L., & Liu, J. (2021). E-commerce in the Pandemic and Beyond. BIS Bulletin, No 36.
Allen, F., Gu, X., & Jagtiani, J. (2022). Fintech, Cryptocurrencies, and CBDC: Financial Structural Transformation in China. Journal of International Money and Finance, 124, 102625.
Auer, R., Cornelli, G., & Frost, J. (2020a). Rise of the Central Bank Digital Currencies: Drivers, Approaches and Technologies. BIS Working Paper.
Auer, R., Cornelli, G., & Frost, J. (2020b). COVID-19, Cash, and the Future of Payments. BIS Bulletin, 3, 1–7.
Auer, R., Monnet, C., & Shin, H. S. (2021a). Distributed Ledgers and the Governance of Money. Monetary and Economic Department. BIS Working Papers No 924.
Auer, R., Haene, P, & Holden,H. (2021b). Multi-CBDC Arrangements and the Future of Cross-border Payments. BIS Paper, March.
Bank for International Settlements. (2018). Central Bank Digital Currencies. Committee on Payments and Market Infrastructures, Markets Committee.
Bank for International Settlement, CPMI, Innovation Hub, International Monetary Fund, & WorldBank. (2021). Central Bank Digital Currencies for Cross-border Payments Report to the G20.
Barontini & Holden. (2019). Proceeding with Caution - a Survey on Central Bank Digital Currency. Bank for International Settlements, 101(January), 1–15.
Barrdear, J., & Kumhof, M. (2021). The Macroeconomics of Central Bank Digital Currencies. Journal of Economic Dynamics and Control.
Bindseil, U. (2020). Tiered CBDC and the Financial System. SSRN Electronic Journal. Boar, C., Holden, H., & Wadsworth, A. (2020). Impending Arrival - a Sequel to the Survey on Central Bank Digital Currency. BIS Papers, 107, 19.
Boar, Codruta & Wehrli, A. (2021). Ready, Steady, Go? - Results of the Third BIS Survey on Central Bank Digital Currency. BIS Paper, 114.
Brainard, L. (2021). Private Money and Central Bank Money as Payments Go Digital: An Update on CBDCs. Speech Board Governors of the Federal Reserve at the Consensus by CoinDesk 2021 Conference.
Carstens, A. (2021). Central Bank Digital Currencies: Putting a Big Idea into Practice.
Chinn, M and Ito, H (2020). Notes on The Chinn-Ito Financial Openness Index 2018 Update. The dataset is available at http://web.pdx.edu/~ito/Chinn-Ito_website.htm
Chorzempa, M. (2021). China, the United States, and Central Bank Digital Currencies: How Important is it to be First? China Economic Journal, 14, 102–115.
Cohen, B. J. (2001). Electronic Money: New Day or False Dawn? Review of International Political Economy, 8, 197–225.
Cour-Thimann, P., & Jung, A. (2021). Interest-rate Setting and Communication at the ECB in its First Twenty Years. European Journal of Political Economy, 70, 1–24.
Davoodalhosseini, S. M. (2021). Central Bank Digital Currency and Monetary Policy. Journal of Economic Dynamics and Control, 104150.
Dong, Y., Hou, Q., & Ni, C. (2021). Implicit Government Guarantees and Credit Ratings. Journal of Corporate Finance, 69, 102046.
Eilat, Y., & Zinnes, C. (2002). The Shadow Economy in Transition Countries: Friend or Foe? A Policy Perspective. World Development, 30, 1233–1254.
Engert, W., & Fung, B. S. C. (2017). Central Bank Digital Currency: Motivations and Implications. Bank of Canada Staff Discussion Paper 2017-16.
Fabris, N. (2019). Cashless Society - the Future of Money or a Utopia? Journal of Central Banking Theory and Practice, 8, 53-66.
Ferré, M., Garcia, J., & Manzano, C. (2018). Tax Efficiency, Seigniorage and Central Bank Conservativeness. Journal of Macroeconomics, 56, 218–230.
Finextra. (2022). China’s Digital Yuan Wallet Arrives in Android and Apple App Stores. https://www.finextra.com/newsarticle/39461/chinas-digitalyuan-wallet-arrives-on-the-android-and-apple-app-stores?utm_medium=newsflash&utm_source=2022-1-5&member=86413
Folkerts-Landau, D., & Garber, P. (1997). The Reform of Wholesale Payment Systems. Finance & Development, 34, 25.
Foster, K., Greene, C., & Stavins, J. (2020). The 2019 Survey of Consumer Payment Choice: Summary Results. Federal Reserve Bank of Atlanta.
Garriga, A. C., & Rodriguez, C. M. (2020). More Effective than We thought: Central bank Independence and Inflation in Developing Countries. Economic Modelling, 85, 87-105.
Hong, K. H., Park, K., & Yu, J. (2018). Crowding Out in a Dual Currency Regime? Digital Versus Fiat Currency. Emerging Markets Finance and Trade, 54, 2495–2515.
International Monetary Fund. (2022). World Economic Outlook April 2022: War Sets Back the Global Recovery.
Kawamura, T., Mori, T., Motonishi, T., & Ogawa, K. (2021). Is Financial Literacy Dangerous? Financial Literacy, Behavioral Factors, and Financial Choices of Households. Journal of the Japanese and International Economies, 60, 101131.
Keister, T., & Sanches, D. (2019). Should Central Banks Issue Digital Currency? Working Papers 19-26, Federal Reserve Bank of Philadelphia.
Kiff, J., Alwazir, J., Davidovic, S., Farias, A., Khan, A., Khiaonarong, T., & Malaika. M. (2020). A Survey of Research on Retail Central Bank Digital Currency. IMF Working Paper 20/104, International Monetary Fund.
Kim, Y. S., & Kwon, O. (2019). Central Bank Digital Currency and Financial Stability. SSRN Electronic Journal.
Lashitew, A. A., van Tulder, R., & Liasse, Y. (2019). Mobile Phones for Financial Inclusion: What Explains the Diffusion of Mobile Money Innovations? Research Policy, 48, 1201–1215.
Lee, D. K. C., Yan, L., & Wang, Y. (2021). A Global Perspective on Central Bank Digital Currency. China Economic Journal, 14, 52–66.
Lee, J. N., Morduch, J., Ravindran, S., & Shonchoy, A. S. (2022). Narrowing the Gender Gap in Mobile Banking. Journal of Economic Behavior and Organization, 193, 276–293.
Li, J., Wu, Y., & Xiao, J. J. (2020). The Impact of Digital Finance on Household Consumption: Evidence from China. Economic Modelling, 86, 317-326.
Liu, Jinan, & Serletis, A. (2019). Volatility in the Cryptocurrency Market. Open Economies Review, 30, 779–811.
Liu, Y., Luan, L., Wu, W., Zhang, Z., & Hsu, Y. (2021). Can Digital Financial Inclusion Promote China’s Economic Growth? International Review of Financial Analysis, 78 (September).
Meaning, J., Dyson, B., Barker, J., & Clayton, E. (2021). Broadening Narrow Money: Monetary Policy with a Central Bank Digital Currency. International Journal of Central Banking, 17, 1–42.
Medina, L., & Schneider, F. (2019). Shedding Light on the Shadow Economy: A Global Database and the Interaction with the Official One.
Nolivos, R. D., & Vuletin, G. (2014). The Role of Central Bank Independence on Optimal Taxation and Seigniorage. European Journal of Political Economy, 34, 440–458.
Obstfeld, M. (2021). Two Challenges from Globalization. Journal of International Money and Finance, 110, 102301.
Parlour, C. A., Rajan, U., & Zhu, H. (2020a). When FinTech Competes for Payment Flows. SSRN Electronic Journal.
Parlour, C. A., Walden, J., & Rajan, U. (2020b). Payment System Externalities and the Role of Central Bank Digital Currency. Ross School of Business Paper, 1337.
People’s Bank of China. (2021). Progress of Research and Development of E-CNY in China.
Prabheesh, K. P., & Eki Rahman, R. (2019). Monetary Policy Transmission and Credit Cards: Evidence from Indonesia. Bulletin of Monetary Economics and Banking, 22, 137–162.
Qian, Y. (2019). Central Bank Digital Currency: Optimization of the Currency System and its Issuance Design. China Economic Journal, 12, 1–15.
Shirai, S. (2019). Money and Central Bank Digital Currency. ADBI Working Paper, 922.
Soderberg, G. (2022). Behind the Scenes of Central Bank Digital Currency, Emerging Trends, Insights, and Policy Lessons. Note/2022/004, International Monetary Fund.
Wang, Z., & Wolman, A. L. (2016). Payment Choice and Currency Use: Insights from Two Billion Retail Transactions. Journal of Monetary Economics, 84, 94–115.
Wang, P., Wen, Y., & Xu, Z. (2018). Financial Development and Long-run Volatility Trends. Review of Economic Dynamics, 28, 221–251.
Woodford, M. (2000). Monetary Policy in a World without Money. International Finance, 3, 229–260.
Zams, B. M., Indrastuti, R., Pangersa, A. G., Hasniawati, N. A., Zahra, F. A., & Fauziah, I. A. (2020). Designing Central Bank Digital Currency for Indonesia: The Delphi-analytic Network Process. Bulletin of Monetary Economics and Banking, 23, 411–438.
Zhou, X. B., Wei, W., Jang, C. L., & Chang, C. P. (2019). The Impacts of Government R&D Expenditure on Innovation in Chinese Provinces: What’s the Role of Corruption. Bulletin of Monetary Economics and Banking, 21, 409–430.
Copyright (c) 2022 Buletin Ekonomi Moneter dan Perbankan
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
Buletin Ekonomi Moneter dan Perbankan / Bulletin of Monetary Economics and Banking is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.