Monetary Policy and Digital Money in the 21st Century

This thesis deals with the evaluation of the importance of the origin and introduction of a central bank digital currency /CBDC/. The study analyses and determines the main implications of the launch of CBDC for consumers, central bank monetary policy and an economy with a simultaneous restriction or cancellation of cash. The thesis examines and compares the structure of means of payments in the euro area, the Czech Republic, Sweden, Norway and the United Kingdom from the beginning of the 21st century. Countries with low cash usage have optimal preconditions for the introduction of commonly available digital money. The research indicates that foremost among such countries are Sweden and Norway. The formal abolition of cash is unlikely, and low cash usage is caused predominantly by the influence of wholesale and retail tradesmen and consumers. The thesis finds that the extent of cash usage is the key aspect influencing the importance of digital money. When cash and electronic money coexist, CBDC loses its meaning. The cashless environment together with CBDC enables the central bank to achieve its monetary policy target more easily. Therefore monetary policy transmission becomes more effective. The optimal effect is reached by means of CBDC programmability, which in a cashless economy enables for the determination of the effective negative interest rate or other restrictions. The convertibility of currencies is an obstacle to increasing the effectiveness of the transmission mechanism. The transferral of all transactions into the digital environment decreases the consumer anonymity and privacy. The economic implication of the introduction of CBDC and the restriction or abolition of cash is an increased output in the economy as measured by gross domestic product.