Hosting faculty Negative Interest Rates on Central Bank Digital Currency
Organised by: RCE 4 (Data Analytics and Modelling)
Presentation Title: Risk Seeking
Time and Date: 14:00 - 15:30, Friday, 20 December 2024 (Beijing time)
Language: English
Onsite location: BS 574
Abstract: With early evidence from the People's Bank of China(PBOC)'s experiment on its Digital Currency Electronic Payment platform being a mixed bag, the modelling of the optimal returns on central bank digital currency (CBDC) has returned to the forefront of policy agenda. Notably, the debates on paying negative CBDC interest rates have intensified again, and I evaluate the macroeconomic impact of negative CBDC interest rates through the lens of a dynamic general equilibrium model, where agents’ CBDC demand is motivated by a liquidity constraint. By uncovering a non- trivial portfolio effect, on top of the substitution effect betweenCBDC and capital, I find CBDC policy to be potentially both anti-cyclical and pro-cyclical. Notably, the simulated data analytics based transitory decline in theCBDC price level suggests a"fight to quality”effect, which appears to be consistent with preliminary evidence.
Presenter: Dr. Pengfei Jia, Nanjing University
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