Macro-financial implications of central bank digital currencies

Mubeen Abdur Rehman, Muhammad Irfan, Muhammad Abubakr Naeem, Brian M. Lucey, Sitara Karim

Research output: Contribution to journalArticlepeer-review

7 Citations (Scopus)


The considerable deployment of central bank digital currencies (CBDCs) is imminent, as its interest has attracted the whole world. However, CBDCs faces several political, technological, and legal challenges. We add a few more challenges that have not received much attention and summarize them in the extant literature. We then emphasize a broad version of money to examine its likely impact on financial stability. Moreover, using time series data of three leading economies and replying to past episodes’ evidence of financial innovation, the historical behaviour to incorporate the impact of CBDCs, and the velocity of circulation, we scrutinize the hypothetical influence of CBDCs on financial stability and inflation. This study employs McCallum's policy rule based on money growth, which deals with monetary policy. Our simulations indicate that the CBDCs do not produce higher inflation while setting financial stability at risk. This study also suggests the necessary policy implications.

Original languageEnglish
Article number101892
JournalResearch in International Business and Finance
Publication statusPublished - Jan 2023


  • Broad money
  • CBDC
  • Income
  • Interest rate
  • Velocity

ASJC Scopus subject areas

  • Business, Management and Accounting (miscellaneous)
  • Finance


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