The Impact of Central Bank Digital Currency on the Money Multiplier: A Comparative Analysis of Design Schemes across Countries

Abstract

The research, development and piloting of central bank digital currency (CBDC) are profoundly affecting the transmission mechanism of monetary policy. Starting from the constituent elements of the money multiplier, this paper constructs an institutional analysis framework covering three dimensions, namely interest-bearing rules, operational architecture and substitution targets, and, based on a comparison among three representative schemes (China’s e-CNY, Sweden’s e-krona and the Bahamas’ Sand Dollar), examines the differentiated mechanisms of money multiplier changes under different institutional arrangements. The study finds that interest-bearing rules determine whether a CBDC possesses saving attributes and the intensity of its substitution for deposits; the operational architecture determines the intermediary position of commercial banks in the credit-creation chain; and the substitution target and holding constraints determine the potential scale of deposit disintermediation. A design that is non-interest-bearing and positioned as a cash substitute can minimize the shock to the money multiplier, whereas an interest-bearing model and a high-limit design will significantly strengthen the deposit-substitution effect and trigger financial disintermediation risk, and the two-tier operational architecture constitutes an important institutional line of defense for mitigating the shock. Accordingly, this paper proposes policy recommendations such as maintaining the non-interest-bearing positioning, preserving two-tier operation, and dynamically adjusting holding caps.