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Summary

This paper explores how central bank digital currencies (CBDCs) could enhance the delivery of social safety nets (SSNs). It assesses CBDC design features and their implications for payment administration and delivery. Findings suggest that using CBDCs solely as payment delivery solutions offers limited advantages over existing systems such as faster payment systems. However, leveraging CBDCs as payment administration platforms—with peer-to-peer transfers, decentralized ledger access, and advanced programmability—could transform SSN delivery by enabling agencies to automate transfers, operate independently from private financial intermediaries, and monitor transactions directly. These benefits come with significant challenges, including privacy concerns, compliance risks, and infrastructure requirements. The paper emphasizes that realizing CBDCs’ full potential for SSNs will depend on thoughtful integration with existing systems and a clear understanding of their comparative advantages. Aimed at social protection policymakers and finance specialists, it highlights the need for collaboration between CBDC developers and SSN administrators to ensure that digital currencies effectively support inclusive and efficient benefit delivery.

Subject:

Blockchain and DLT,
Central Bank digital currencies,
Smart contracts,
Technology

Keywords:

Blockchain and DLT,
Central Bank digital currencies,
Central Bank Digital Currencies,
Financial Inclusion,
Fintech,
Government Transfers,
Payment Systems,
Smart contracts,
Social Safety Nets

Summary

This paper presents the Mauritius Quarterly Projection Model (QPM), the semi-structural analytical tool that underpins the modernized Forecasting and Policy Analysis System of the Bank of Mauritius (BOM). The model is designed to capture the salient features of the domestic economy, including key monetary policy transmission channels and the recently introduced flexible inflation targeting framework. Relative to canonical QPM structures, it also incorporates a parsimonious fiscal block and a labor market block, providing key insights on broader macroeconomic dynamics and enriching the policy advice. The model optimally balances theoretical consistency—evident in coherent shock propagation and policy responses—and empirical reliability, as reflected in its strong in-sample forecasting performance. The practical use of the Mauritius QPM in the context of the BOM’s regular forecasting cycles for the production of baseline projections, counterfactual simulations and alternative scenarios, together with the corresponding model-based economic narratives, make it a critical component of the BOM’s forward-looking monetary policy formulation.

Subject:

Exchange rates,
Foreign exchange,
Inflation,
Labor,
Labor markets,
Output gap,
Prices,
Production,
Real effective exchange rates,
Real wages,
Wages

Keywords:

Exchange rates,
Forecasting and Policy Analysis,
Global,
Inflation,
Labor markets,
Mauritius,
Monetary Policy,
Output gap,
Quarterly Projection Model,
Real effective exchange rates,
Real wages,
Transmission Mechanism,
Wages