How do central bank digital currencies (... - tlooto, The Most Powerful AcademicGPT

Monetary policy transmission is reshaped by central bank digital currencies (CBDCs) through both traditional channels—interest rate, credit, exchange rate, asset price, and expectations—and novel programmable tools. Empirical and theoretical studies underscore that the magnitude and direction of these effects hinge critically on CBDC design features (remuneration, access, holding limits, and interoperability). 1. Interest-Rate Channel • Direct rate pass-through: An interest-bearing retail CBDC enables central banks to transmit policy rates straight to households and firms, bypassing bank deposit rates and shortening transmission lags [1][2]. • Effective lower bound (ELB): By reducing reliance on zero-yielding cash, CBDCs lower the ELB constraint, allowing negative nominal rates to be more potent [1][3]. • Limits of interest bearing: General‐equilibrium models suggest that simply replacing cash with an interest-bearing CBDC does not expand the set of attainable allocations beyond those