Introducing a new index of CBDC development

Abstract This study constructs a new index to measure central bank digital currency (CBDC) development by systematically tracking the progress of CBDC projects across central banks from 2014 to 2025. We compute two weighted indices - simple and GDP-weighted - which demonstrate significant acceleration in CBDC development during both the 2017–2021 and 2021–2023 periods. Empirical analysis reveals Granger causality between our CBDC indices and several key financial indicators: the CBDC uncertainty index, global cryptocurrency market metrics (trading volume and market capitalization), as well as price dynamics, volatility, and liquidity measures for major cryptocurrencies. Our ARDL estimations identify long-term cointegration relationships between CBDC development and these variables. Specifically, the indices have a long-term positive influence on the CBDC uncertainty index, the trading activity and market capitalization of the global cryptocurrency market, and the price, trading volume, and market capitalization. In contrast, the CBDC development indices are associated with a long-term reduction in price volatility for most of these cryptocurrencies. These findings suggest that central bank digital currency initiatives may play a significant role in shaping the evolution and stability of digital asset markets. JEL: E42, E50, E52.