Assessment of the impact of the central bank's digital currency on the macroeconomic stability of the economy of Kazakhstan

Research Objective: The aim of this study is to assess the macroeconomic consequences of introducing a central bank digital currency (CBDC) in the Republic of Kazakhstan.
Research Methodology: This research analyzes the effects of CBDC implementation in Kazakhstan from the standpoint of macroeconomic stability and household welfare. It employs a medium-scale Dynamic Stochastic General Equilibrium (DSGE) model adapted to account for the presence of digital currency and cash. The study also applies scenario analysis methods, encompassing five CBDC introduction scenarios based on calculations of standard deviations and correlation dependencies between scenarios.
Originality and Practical Value of the Study: The introduction of a central bank digital currency (CBDC) entails not only technological and economic aspects but also significant macroeconomic consequences. In the transition to digital forms of settlement, there is a need for a comprehensive analysis of the impact of CBDC on the stability of the national economy. Digital currency can serve as an alternative to cash, current accounts, and deposits in commercial banks. The degree of substitutability between different forms of money depends on the technical characteristics of the CBDC. Therefore, it is essential to determine the potential demand for digital currency and assess its impact on macroeconomic and financial stability.
Research Findings: Using a constant elasticity of substitution estimation, the CBDC was integrated into the medium-scale DSGE model, which made it possible to identify transmission mechanisms of economic shocks and assess the consequences of digital currency for macroeconomic stability and household welfare via the loss function

1. Boar, C., & Wehrli, A. (2021). Ready, steady, go? Results of the third BIS survey on central bank digital currency. BIS Papers. 2021

2. Foster, K., Blakstad, S., Gazi, S., & Bos, M. (2021). Digital currencies and CBDC impacts on least de- veloped countries (LDCs). The Dialogue on Global Digital Finance Governance Paper Series.

3. Andolfatto, D. (2021). Assessing the impact of central bank digital currency on private banks. The Eco- nomic Journal, 131(634), 525–540.

4. Chiu, J., Davoodalhosseini, S. M., Jiang, J. H., & Zhu, Y. (2019). Bank market power and central bank digital currency: Theory and quantitative assessment.

5. Fernández-Villaverde, J., Sanches, D., Schilling, L., & Uhlig, H. (2021). Central bank digital currency: Central banking for all? Review of Economic Dynamics, 41, 225–242.

6. Auer, R., Haene, P., & Holden, H. (2021). Multi-CBDC arrangements and the future of cross-border pay- ments. BIS Papers, (115), 1–22.

7. Auer, R., Cornelli, G., & Frost, J. (2020). Central bank digital currencies: Drivers, approaches and tech- nologies. BIS Working Papers, (880), 1–39.

8. Andriyanov, V. K. (2021). Tcifrovye valyuty tcentralnyh bankov I denezhno-kreditnaya politika. Mezh- dunarodnye finansy, (2), 12–25. (in Russian)

9. Engert, W., & Fung, B. S. C. (2017). Central Bank Digital Currency: Motivations and Implications. Bank of Canada Staff Discussion Paper, (2017-16), 1–28.

10. Ketterer, J. A., & Andrade, G. (2016). Digital Central Bank Money and the Unbundling of the Banking Function. Inter-American Development Bank Discussion Paper, (449), 1–22.

11. Serikbaeva, J. D., Kassenova, G. E., & Parmanova, R. S. (2024). Vnedrenie natcionalnyh tcifrovyh valyut: potentcialnoe vliyanie na finansovuyu sistemu I perspectivy integratcii s mezhdunarodnyi platezhnymi siste- mamy Central Asian Economic Review, (3)156, 211. https://caer.narxoz.kz/jour?locale=ru_RU (in Russian)

12. Turmakhanbetova, A. A., Kasenova, G. E., & Nurgalieva, A. M. (2024). Kazakstandagy ortalyk bank- ting tcifrlyk valyutasyna (CBDC) suranysty bolzhau . Central Asian Economic Review, (5)158, 169. https://caer.narxoz.kz/jour?locale=ru_RU (in Kazakh)

13. Marin, I. G. (2024). Vliyanie vnedrenie tcifrovyh valyut TCB na globalnye finansy Economy and Busi- ness: Theory and Practice, 4-2(110). (in Russian)

14. Barrdear, J., & Kumhof, M. (2021). The macroeconomics of central bank digital currencies. Bank of England Working Paper No. 605.

15. Available at: https://www.bankofengland.co.uk/working-paper/2021/the-macroeconomics-of-central-bank-digital-currencies

16. Abilov, N. (2021). A Medium-Scale Bayesian DSGE Model for Kazakhstan with incomplete exchange rate pass-through. International Economic Journal, 35(4), 486–522. https://doi.org/10.1080/10168737.2021.1999298

17. CF Survey Centre «NAC Analytica». (n.d.). Retrieved from https://www.nacanalytica.kz/index.php

18. Minesso, F., Mehl, A., & Stracca, L. (2022). Central bank digital currency in an open economy. Journal of Monetary Economics, 127, 54–68