CHALLENGES OF THE INTRODUCTION OF THE DIGITAL EURO - SEARCH FOR A COMPATIBILITY MODEL FOR NORTH MACEDONIA

Abstract

The introduction of the digital euro will have an impact on the implementation of the financial policy of North Macedonia. Based on an assessment of its own interests and capabilities, North Macedonia can decide on a model for compatibility with the digital euro. The paper analyses three possible models for cross-border system compatibility. Assuming that a digital euro provides a new channel for the transmission of domestic monetary policy shocks, the basic cross-border effects of the introduction of the digital euro can be summarised as an increase in euroisation, a reduction in monetary policy independence and a reduction in the creditor function of last resort. These effects need to be countered with integrated smart features such as automatic remuneration and bilateral cooperation with the ECB or a combination of these models. According to the analysis, this functionality can be achieved through the model, which is a technological bridge between the systems, as opposed to the model, which is a separate system, or the model, which is integrated. Although the proposed model is the most desirable in terms of potential gains and addressing potential risks, this model involves the development of an own digital currency (digital denar).