Core Focus: The transition from the current “floor” operational framework to corridor or ceiling systems as CBDC adoption affects reserve demand, bank funding, and interbank market dynamics.

In-Depth Notes:
The introduction of CBDC has significant implications for the operational framework of monetary policy—the system through which central banks manage reserves and implement policy. Research analyzing CBDC’s impact on the operational framework in a New-Keynesian model with a frictional interbank market has identified potential transitions between floor, corridor, and ceiling systems .

The Current Floor System:
Many major central banks currently operate a “floor” system, where reserves are abundant and the policy rate is controlled through administered rates (e.g., interest on reserves). In this system, the interbank rate is pushed against the floor of the corridor formed by the central bank’s standing facilities. The supply of reserves is ample enough that changes in reserve supply do not affect short-term interest rates.

The Impact of CBDC on the Operational Framework:
CBDC adoption implies a contraction in bank deposits, as households shift some funds from commercial banks to CBDC. This deposit contraction is absorbed by a fall in reserves and, if large enough, increased recourse to central bank credit . As reserves decline and banks’ recourse to central bank credit increases, the operational framework shifts from a “floor” to a “corridor” system, and then potentially to a “ceiling” system .

• Corridor System: In a corridor system, reserves are scarce and the interbank rate lies in the middle of the corridor formed by the central bank’s lending and deposit rates. The central bank needs to actively manage reserve supply to keep the policy rate on target.

• Ceiling System: In a ceiling system, the interbank rate is pushed against the ceiling of the corridor (the lending facility rate). This occurs when reserves are extremely scarce and banks must rely heavily on central bank lending.

The Role of Interbank Market Structure:
The transition between operational frameworks depends on the degree of substitutability between CBDC and bank deposits and the functioning of the interbank market. Research comparing a “corridor system,” in which the interbank rate lies in the middle of the corridor, with a “floor” or “ceiling” system, has found that the interbank market structure critically shapes the impact of CBDC on monetary policy transmission .

Policy Implications:
The potential transition in operational frameworks has important policy implications. Central banks must consider how CBDC design—particularly remuneration and holding limits—affects reserve demand and interbank market functioning. The resulting changes in the operational framework shape the impact of CBDC on credit, investment, and output . This means that the introduction of a CBDC is not merely a payment innovation but a structural change that may require significant adjustments to the operational framework of monetary policy.