It is now over a year since the Covid-19 pandemic struck out of the blue, plunging the global economy into a historically deep recession. An acute health crisis turned into an overwhelming economic crisis, as policymakers adopted stringent containment measures to save lives. This was a recession in response to an insidious invisible enemy.

The global recession was deep, but ended sooner than expected, aided by considerable policy support. The recovery has been uneven; some countries and sectors returned to pre-pandemic growth paths, while others lagged. Meanwhile, financial conditions have remained exceptionally accommodative.

The long-term rise in economic inequality since the 1980s is largely due to structural factors, well outside the reach of monetary policy, and is best addressed by fiscal and structural policies.

Central bank digital currencies (CBDCs) offer in digital form the unique advantages of central bank money: settlement finality, liquidity and integrity. They are an advanced representation of money for the digital economy.

Key takeaways

Central bank digital currencies (CBDCs) offer in digital form the unique advantages of central bank money: settlement finality, liquidity and integrity. They are an advanced representation of money for the digital economy.

•Digital money should be designed with the public interest in mind. Like the latest generation of instantretail payment systems, retail CBDCs could ensure open payment platforms and a competitive level playing field that is conducive to innovation.

•The ultimate benefits of adopting a new payment technology will depend on the competitive structureof the underlying payment system and data governance arrangements. The same technology that can encourage a virtuous circle of greater access, lower costs and better services might equally induce a vicious circle of data silos, market power and anti-competitive practices. CBDCs and open platforms are the most conducive to a virtuous circle.

•CBDCs built on digital identification could improve cross-border payments, and limit the risks of currency substitution. Multi-CBDC arrangements could surmount the hurdles of sharing digital IDs across borders, but will require international cooperation.