Central Bank Digital Currency and the Monetary Policy Fractal Trilemma: Definition of Money, Financial Instruments and Monetary Policy Tools According to Kantian Categories

Davide Fogarolo

Student thesis: Master thesis


This paper is focused on central bank digital currency (CBDC) and on the consequences in the monetary policy following its issuance. Since it is yet to be decided upon, another methodology is requested. Firstly, I am going to define money, financial instruments and monetary policy tools via Kantian categories and the mathematical conversion concept in a money-schemata theory. That framework can also explain the major clashes between orthodox and heterodox theories of money and solve the endogenous-exogenous creation of money disagreement. Secondly, I will be discussing how the issuance of CBDC will transform the classic monetary policy trilemma in a new trilemma, called fractal because it originates by the combinations of two trilemmas, one within the other (a domestic and an international one), that figuratively recalls the Sierpinski triangle and its fractal structure. Finally, I am going to explain how, applying the rules of the fractal monetary policy trilemma, policy makers can use two domestic independent monetary policy instruments (CBDC and current main interest rate) to target distinctly inflation and economic growth rate, keeping parity between the two domestic currencies (and hypothetically address efficiently a scenario of stagflation).

EducationsMsc in Business Administration and Philosophy, (Graduate Programme) Final Thesis
Publication date2018
Number of pages76
SupervisorsOle Bjerg