Ouk-Yeop Kwon

Abstract We examine the implications of central bank digital currency (CBDC) for credit supply and financial stability using a monetary general equilibrium model. The introduction of deposits in CBDC account decreases credit supply by banks, raising the nominal interest rate and lowering a bank's reserve‐deposit ratio. This increases the likelihood of bank panic in which banks exhaust cash reserves. However, once the central bank can lend all the deposits in CBDC account to banks, an increase in

Abstract Can introducing a central bank digital currency (CBDC) improve social welfare? We construct a dual currency model to study whether CBDC with a record‐keeping technology can reduce tax evasion incentives in cash transactions and further achieve better allocations than a cash‐only economy with respect to fiscal arithmetic. We show that when there is inefficiency associated with tax evasion in cash transactions, introducing CBDC with strictly positive interest can remove the inefficiency a

Abstract Privacy protection is among the key features to consider in the design of central bank digital currency (CBDC). Using a nationally representative sample of over 3,500 participants, we conduct a randomized online survey experiment to examine how the willingness to use CBDC as a means of payment varies with the degree of privacy protection and information provision on the privacy benefits of using CBDC. We find that both factors significantly increase participants’ willingness to use CBDC

This study employs a general equilibrium monetary search model to examine the effects of the recent dollarization in North Korea on seigniorage and prices. Maximum seigniorage is generated at a high rate of money growth when dollarization is mild. However, under a high degree of dollarization seigniorage declines sharply when the money growth rate is high. Accordingly, seigniorage can be increased by de-dollarizing the economy through lowering the money growth rate. This finding implies that the

In this study, we describe the fintech and cryptoassets-related trends in the Republic of Korea and review the measures and assessments of the Government of the Republic of Korea and the Bank of Korea. We also provide discussion on central bank digital currency. Fintech in the Republic of Korea still accounts for only a small share of payment and settlement services, but it can induce changes in the financial industry. It is, however, unlikely that cryptoassets will become widely used and accept

Abstract We explore how credit market frictions matter for the coessentiality of money and credit. Limited commitment calls for credit limits that are tailored according to borrowers' productivity. Under an adverse selection problem caused by asymmetric information, however, lenders impose the credit limit of the low‐productivity borrower onto the high‐productivity borrower. If productivities differ sufficiently between borrowers, the high‐productivity borrower is credit‐constrained and is willi