Central Bank Digital Currencies and Monetary Policy Transmission: Evidence from Global Pilot Programs and Early Implementations

Abstract

This study examines the effects of Central Bank Digital Currency (CBDC) implementation on monetary policy transmission and financial inclusion using data from 23 pilot programs and 8 full scale implementations spanning 2020 to 2025. Employing synthetic control methods and event study analysis, we assess whether CBDCs enhance monetary policy effectiveness and expand access to financial services. Our findings indicate that retail CBDCs modestly improve interest rate pass through from policy rates to deposit rates, with transmission coefficients increasing by 12% in jurisdictions with active CBDC programs. Financial inclusion effects are substantial in emerging economies, where CBDC adoption is associated with a 7.3 percentage point increase in formal financial account ownership among previously unbanked populations. However, we find evidence of bank deposit outflows averaging 3.2% in the first year following CBDC introduction, raising concerns about financial stability and bank funding costs. Design features matter considerably: interest bearing CBDCs with holding limits demonstrate superior monetary transmission properties while mitigating disintermediation risks. The results suggest that CBDCs represent a potentially valuable addition to the monetary policy toolkit, though successful implementation requires careful attention to design choices balancing multiple policy objectives.