Interest-bearing CBDCs could solve welfare trade-off – IMF paper

Digital currency

A new paper from the International Monetary Fund argues that making a central bank digital currency (CBDC) interest-bearing would avoid the welfare losses that might be created by non-interest bearing CBDCs.  

Designing a non-interest-bearing CBDC creates “a challenging welfare tradeoff for the central bank”, note Itai Agur, Anil Ari and Giovanni Dell’Ariccia in their paper. “On the one hand, a cash-like CBDC risks reducing cash demand below the critical mass”, causing major problems for

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