University of Twente Student Theses


Adoption and implications of CBDC : an agent-based modelling approach

Martens, M. (2021) Adoption and implications of CBDC : an agent-based modelling approach.

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Abstract:We investigate the adoption and implications of a retail CBDC in the Netherlands among households and firms under the monetary and technical control of the central bank. For this purpose, we have developed a non-spatial agent-based model with network externalities (small-world network) in which households decide among a variety of available payment instruments. In contrast, firms choose to adopt or remove payment instruments. We simulated multiple scenarios, such as deposit-like and cashlike CBDC, which allowed us to measure the crowding-out effect of the CBDC on cash and deposits for several levels of competitiveness. We found that the network effect can either break or make the success of the CBDC, and the competitiveness of the CBDC (relative to other payment instruments) is critical to initiate adoption. The results suggest that a CBDC will likely supplement cash (and deposits depending on specific design choices such as offline capability). The central bank needs to assess both extremes’ risks and benefits carefully, not launching CBDC or competitive CBDC with complete crowding-out. Likely, the “golden mean” of CBDC-as-a-complement may not be feasible, at least not within the limits of our model.
Item Type:Essay (Master)
De Nederlandsche Bank, Amsterdam, Netherlands
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:30 exact sciences in general, 50 technical science in general, 83 economics, 85 business administration, organizational science
Programme:Industrial Engineering and Management MSc (60029)
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