Most studies on central bank digital currencies focus on the effects after they become well established. This column analyses the macroeconomic effects in the transition to the new equilibrium. Using a two-country model with financial frictions, it shows that, under plausible assumptions for demand for central bank digital currency, the transition is characterised by volatility in the digital currency, cash, and deposits, leading to volatility in loan rates, investment, and consumption. Binding caps on holdings of the digital currency during the transition period are shown to be most effective in reducing ... (full story)