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Central bank digital currencies: an old tale with a new chapter

Published online by Cambridge University Press:  18 September 2024

Michael D. Bordo  and
William Roberds
Michael D. Bordo*
Affiliation:
Rutgers University, NBER and the Hoover Institution, Stanford University
William Roberds*
Affiliation:
Federal Reserve Bank of Atlanta
*
Michael D. Bordo, [email protected].
Corresponding author: William Roberds, Research Department, Federal Reserve Bank of Atlanta, 104 Marietta Street NW, Atlanta, GA 30303-2713, USA, email: [email protected]
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Abstract

We consider the debut of a new monetary instrument, central bank digital currencies (CBDCs). Drawing on examples from monetary history, we argue that a successful monetary transformation must combine microeconomic efficiency with macroeconomic credibility. A paradoxical feature of these transformations is that success in the micro dimension can encourage macro failure. Overcoming this paradox may require politically uncomfortable compromises. We propose that such compromises will be necessary for the success of CBDCs.

Keywords

monetary systemsbanknotescentral banksdigital currencies

JEL classification

E42: Monetary Systems • Standards • Regimes • Government and the Monetary System • Payment Systems E58: Central Banks and Their Policies N10: General, International, or Comparative
Type
The past mirror: notes, surveys, debates
Information
Financial History Review , Volume 31 , Issue 1 , April 2024 , pp. 94 - 122
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Copyright
Copyright © The Author(s), 2024. Published by Cambridge University Press on behalf of the European Association for Banking and Financial History e.V.

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Footnotes

An earlier version of this article was prepared for a conference held in honor of Angela Redish at the University of British Columbia, 14 October 2022. The authors are grateful to conference participants and to an anonymous referee for helpful suggestions and corrections. The opinions expressed in this article are those of the authors and not of the Federal Reserve Bank of Atlanta or of the Federal Reserve System.

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