This study examines the association between Central Bank Digital Currency (CBDC) adoption and inflation dynamics in selected economies, comparing pre- and post-adoption periods and assessing inflation elasticity with respect to key macroeconomic variables.
Annual data from 2010 to 2024 were collected from the World Bank, IMF databases, Trading Economics and relevant central bank or official national sources for four countries: the Bahamas (developed, launched), Singapore (developed, pilot), Jamaica (developing, launched), and China (developing, pilot). Inflation was modelled as the dependent variable, with broad money supply (M3) as the main independent variable, and interest rates, GDP growth, and exchange rates as controls. Country-specific regressions were estimated using ordinary least squares with robust standard errors, and a dummy variable (Post) was included to capture changes in inflation behavior following CBDC adoption.
The results show mixed outcomes. Singapore records significant inflationary associations with GDP growth and CBDC adoption, while Jamaica reflects a marginally significant disinflationary association in the post-CBDC period. The Bahamas and China display no statistically significant CBDC-related changes in inflation. Elasticity analysis highlights broad money as having a strong inflationary association in Singapore but a stabilizing association in China, with weaker effects elsewhere. Overall, CBDC adoption is not associated with uniform inflation outcomes, as observed patterns vary by economic structure and institutional context.
The use of annual data limits the sample size and statistical power. Future studies using higher-frequency data and a broader set of variables could yield more robust evidence.
CBDCs may be associated with divergent inflationary dynamics across economies, suggesting the need for context-specific policy frameworks.
This is among the first comparative studies to examine CBDC adoption and inflation elasticity across developed and developing economies, offering new insights into digital monetary policy outcomes.
