Information, Consumer Privacy, and Central Bank Digital Currency

42 Pages Posted: 10 Dec 2024 Last revised: 4 Mar 2025

See all articles by Kee-Youn Kang

Kee-Youn Kang

University of Liverpool Management School

Zijian Wang

Wilfrid Laurier University - Department of Economics

Date Written: November 10, 2024

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

Suggested Citation

Kang, Kee-Youn and Wang, Zijian, Information, Consumer Privacy, and Central Bank Digital Currency (November 10, 2024). Available at SSRN: https://ssrn.com/abstract=5016148 or http://dx.doi.org/10.2139/ssrn.5016148

Kee-Youn Kang

University of Liverpool Management School ( email )

Zijian Wang (Contact Author)

Wilfrid Laurier University - Department of Economics ( email )

75 University Avenue West
Waterloo, Ontario N2L 3C5
Canada

HOME PAGE: http://sites.google.com/view/zijianwang/

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