Working Paper: NBER ID: w29489
Authors: Sebastian Edwards
Abstract: In this paper, I discuss the implications for emerging countries of the adoption of central bank digital currencies (CBDCs) in advanced jurisdictions, such as the United States, the United Kingdom, and the Euro Zone. The analysis identifies benefits as well as costs. Among the former, one of the most important is lower costs for migrants’ remittances. Some of the costs of global CBDCs are associated with currency substitution, sudden currency depreciations, and lower seigniorage. At the global level, a smooth rollout of CBDCs in center countries requires international coordination. In addition, emerging countries will benefit from the implementation of stronger macroprudential regulations
Keywords: central bank digital currencies; emerging markets; currency substitution; macroprudential regulations
JEL Codes: E31; E41; E58; F31; F36
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| CBDCs (E58) | lower transaction costs for migrants sending remittances (F24) |
| CBDCs (E58) | increase efficiency of cross-border transactions (F55) |
| CBDCs (E58) | facilitate currency substitution in emerging markets (F31) |
| currency substitution (F31) | reduce seigniorage in emerging markets (F31) |
| currency substitution (F31) | complicate monetary policy in emerging markets (E49) |
| CBDCs (E58) | exacerbate vulnerabilities in emerging markets (F65) |
| currency substitution (F31) | pose challenges to macroprudential policies (E61) |