CBDCs, Financial Inclusion, and Optimal Monetary Policy

49 Pages Posted: 11 May 2022 Last revised: 24 Feb 2024

See all articles by David Murakami

David Murakami

University of Milan

Ivan Shchapov

Institut Polytechnique de Paris, CREST

Ganesh Viswanath-Natraj

Warwick Business School

Multiple version iconThere are 2 versions of this paper

Date Written: May 6, 2022


In this paper we study the interaction between monetary policy and financial inclusion in an economy that introduces a central bank digital currency (CBDC). Using a New Keynesian two-agent framework with banked and unbanked households, we show that CBDCs provide a more efficient savings device for the unbanked to smooth consumption, increasing welfare. A Ramsey optimal policy exercise reveals that the CBDC rate is set at a constant spread to the policy rate. We observe a policy trade-off: a higher CBDC rate benefits the unbanked, but disintermediates banks and reduces welfare of banked households. Taken together, our findings highlight the role of tailoring CBDC design based on the level of financial inclusion in an economy.

Keywords: Central Bank Digital Currency, financial inclusion, inequality, monetary policy, Taylor rules, welfare

JEL Classification: F31, G14, G15, G18, G23

Suggested Citation

Murakami, David and Shchapov, Ivan and Viswanath-Natraj, Ganesh, CBDCs, Financial Inclusion, and Optimal Monetary Policy (May 6, 2022). Available at SSRN: https://ssrn.com/abstract=4102397 or http://dx.doi.org/10.2139/ssrn.4102397

David Murakami

University of Milan ( email )

Via Festa del Perdono, 7
Milan, 20122

Ivan Shchapov

Institut Polytechnique de Paris, CREST ( email )

19 Place Marguerite Perey
Palaiseau, 91120

Ganesh Viswanath-Natraj (Contact Author)

Warwick Business School ( email )

Coventry CV4 7AL
United Kingdom
CV4 7AL (Fax)

HOME PAGE: http://https://ganeshvnatraj.netlify.com

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