Modelling the Central Bank digital currency and evaluating the effect of CBDC on banking system and participation banks in Turkey

Through the ages, money has been an item that has affected human history and basically regulated economic life due to its functions: store of value, unit of account, and medium of exchange. Over time, the change in the form and use of money has fundamentally affected both economic life and financial institutions. Digital innovation has brought about comprehensive changes in all sectors of the economy, as in many areas of life, and has revealed a concept such as digital money. Central Bank Digital Currency (CBDC) is a digital form of money, which is the direct obligation of the central bank, expressed in the local currency of that country. It is thought that this new money form will have significant effects on financial institutions according to its design and implementation. In this study, first of all, the conceptual and design features of the central bank digital money, which has been newly discussed and researched by the monetary authorities in the world, are revealed. The possible effects of CBDC on economic life are examined and a unique digital currency circulation model proposal is presented. Moreover, the effect of digital money on the banking sector in case of circulation is analyzed with a simulation model. The analysis has been expanded in the context of participation and deposit banks. There are several aspects that make this work valuable. First of all, since the central bank digital currency is a new concept and has not yet been implemented, it is one of the first research in the literature. Secondly, it is remarkable that the design parameters and economic dimension of a concept that has been discussed in particular for central banks are brought to the attention of the academic community, and that it proposes a model. In addition to all these, the analysis of the effects of the conversion from deposit to CBDC in the banking sector is presented to the attention of our interlocutors as the most original contribution. What word that belongs to yesterday is gone, my loved one, with yesterday; Now is the time to say new things.