Optimal central banking policies: envisioning the post-digital yuan economy with loan prime rate-setting

Lim, K.Y., Liu, C. ORCID: 0000-0003-3770-4821 and Zhang, S., 2024. Optimal central banking policies: envisioning the post-digital yuan economy with loan prime rate-setting. Emerging Markets Review, 59: 101108. ISSN 1566-0141

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Abstract

We develop a DSGE model with cash deposits and digital currencies to study the economic stability of two potential central banking policies in China, a Loan Prime Rate (LPR) policy function and central bank digital currency (CBDC) implementation. We Bayesian-estimate both a benchmark model and a “Post-CBDC world”. In the post-CBDC world, although the introduction of CBDC appears to deepen the procyclicality of macroeconomic variables to real shocks, a potential LPR-setting policy appears to have some degree of policy complementarity with CBDC to mitigate this. We also uncover an optimal policy combination of the LPR rule and Taylor-style CBDC rule.

Item Type:	Journal article
Publication Title:	Emerging Markets Review
Creators:	Lim, K.Y., Liu, C. and Zhang, S.
Publisher:	Elsevier
Date:	March 2024
Volume:	59
ISSN:	1566-0141
Identifiers:	Number Type 10.1016/j.ememar.2024.101108 DOI S1566014124000037 Publisher Item Identifier 1854788 Other
Rights:	This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).
Divisions:	Schools > Nottingham Business School
Record created by:	Jonathan Gallacher
Date Added:	21 Feb 2024 14:49
Last Modified:	21 Feb 2024 14:49
URI:	https://irep.ntu.ac.uk/id/eprint/50908

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