The Macroeconomics of Digital Money : Household Adoption, Bank Intermediation, and Monetary Policy

• Essay I: This paper examines how household-targeted government policies influence financial market participation conditional on financial literacy, focusing on potential Central Bank Digital Currency (CBDC) adoption. Due to the lack of empirical CBDC data, I use the introduction of retail Treasury bonds in Italy as a proxy to investigate how financial literacy affects households' likelihood to engage with the new instrument. Using the Bank of Italy's Survey on Household Income and Wealth, I explore how financial literacy influenced households' participation in the Treasury bond market following the 2012 introduction of retail Treasury bonds, showing that households with some but low financial literacy are more likely to participate than other household groups. Based on these findings, I develop a theoretical model to explore the potential implications of financial literacy for CBDC adoption, showing that low-literate households with limited access to risky assets allocate more wealth to CBDC, while high-literate households use risky assets to safeguard against income risk. These results highlight the role of financial literacy in shaping portfolio choices and CBDC adoption.Essay II (with Hanfeng Chen): We analyze the risks to bank intermediation following the introduction of a central bank digital currency (CBDC) competing with commercial bank deposits as households' source of liquidity. We revisit the result in the literature regarding the equivalence of payment systems introducing a collateral constraint on banks borrowing from the central bank. Comparing two equilibria with and without the CBDC, we find that even with this constraint, the central bank can ensure the same equilibrium allocation and price system by offering loans to banks. However, to access loans, banks must hold collateral at the expense of extending credit to firms. Thus, while the CBDC introduction has no real effects on the economy, it does not guarantee full neutrality as it affects banks' business models. In a dynamic model extension, we examine the effects of an increase in the CBDC and show that the CBDC does not cause bank disintermediation or crowd out deposits but may foster an expansion of bank credit to firms.Essay III (with Hanfeng Chen): We study the implications of a central bank digital currency (CBDC) for the transmission of household preference shocks and for welfare in a New Keynesian framework where the CBDC competes with bank deposits for household resources and banks have market power. We show that an increase in the benefit of CBDC has a mildly expansionary effect, weakening bank market power and significantly reducing the deposit spread. As households economize on liquid asset holdings, they reduce both CBDC and deposit balances. However, the degree of bank disintermediation is low, as deposit outflows remain modest. We then examine the welfare implications of CBDC rate setting and find that, compared to a non-interest-bearing CBDC, the gains with standard coefficients for a CBDC interest rate Taylor rule are modest, but they become considerable when the coefficients are optimized. Welfare gains are higher when the CBDC provides a higher benefit.

Ämnesord

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv -- Nationalekonomi (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business -- Economics (hsv//eng)

Nyckelord

Central Bank Digital Currency

Financial literacy

Market participation

Collateral-constrained banks

Monetary policy

Welfare

Economics

Nationalekonomi

Publikations- och innehållstyp

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