Abstract

This research study will investigate how central digital bank currency can suit countries' economies economically. It summarizes an economic survey of how Central Bank Digital Currency (CBDC) might affect countries’ money supply through macroeconomic indicators. It will delve into analyzing the impact of CBDC on final household consumption and subsequent economic consequences. Moreover, the analysis was performed on panel data within four different data sets. The first data set will compare three countries that launched CBDC in 2020 with three other countries that did not. This report provides evidence that the countries with CBDC are economically stable concerning household expenditures. The three different panel data sets were used to measure the impact of CBDC on countries’ economic stability after CBDC announcements. To further compare a yearly analysis within 2017, 2019, and 2020 CBDC announcements toward their differences of 5 independent variables that impact household final consumption expenditures. The first panel data set on launched CBDC will test for a difference and difference estimator to analyze the impact of the before and aftereffects of CBDC. On the other hand, the three other panel data sets, over the announcement of CBDC, will undergo an OLS regression estimator within fixed and random effects. Analysis for both test results rejected my hypothesis that CBDC can be economically stable as a one-to-one transaction tool. Since the results found didn’t provide a true influential impact on household expenditures because of the nominal values that occurred in the regression. Therefore, with this analysis, I can conclude that since CBDC is still a new project with the limitation of the data did not give me confidence in a long-term solution as a transaction payment system. But I support CBDC as a potential risk-free asset that a government can provide when financial shocks occur in its banking system. It can enable instant transfers from private banks to a government-held digital currency.

Advisor

Tian, Huiting

Department

Business Economics

Disciplines

Business Analytics | Business Intelligence | Corporate Finance | Technology and Innovation

Publication Date

2023

Degree Granted

Bachelor of Arts

Document Type

Senior Independent Study Thesis

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