Information, Consumer Privacy, and Central Bank Digital Currency

Abstract

We develop a general equilibrium framework to examine the informational value of CBDC transaction data. Access to individual transaction data allows the government to guide the economy toward more efficient equilibria through targeted subsidies. Additionally, CBDC data enhances the government's ability to estimate aggregate demand, facilitating more informed consumption and investment decisions. Interestingly, when inflation is high, disclosing the information about aggregate demand tends to improve welfare through both consumption and investment, but the effect reverses under low inflation. Moreover, under certain conditions, consumers' privacy concerns over the use of CBDC can increase the value of the information about aggregate demand, partially offsetting the negative effect of such concerns on welfare.

Keywords: Central Bank Digital Currency, Privacy, Payment system, Aggregate Shock

JEL Classification: D8, E42, L1