The Paudelian Feedback Framework (PuFF) in CBDC Simulations
Abstract
The Paudelian Feedback Framework (PuFF) introduces a novel adaptive control model for modern monetary systems, where liquidity and interest rates self-adjust through real-time feedback loops.
In the context of Central Bank Digital Currency (CBDC) environments, PuFF enables a form of Cybernetic Capitalism — an economy capable of sensing, interpreting, and correcting itself.
Unlike conventional fixed-rate or rule-based systems, PuFF integrates three interlinked dynamic ratios:
EPR = \frac{x}{x_0}, \quad PAI = k \cdot \log\left(\frac{x}{x_0}\right), \quad SIR = r + k \cdot \log\left(\frac{x}{x_0}\right)
These equations allow liquidity ($x$) and interest rate ($SIR$) to interact through a behavioral feedback coefficient ($k$), which reflects psychological, socio-economic, and temporal sensitivity.
Applied within CBDC systems, PuFF transforms monetary policy into a self-regulating algorithm — one that reduces lag, prevents human bias, and maintains ethical equilibrium between inflation, growth, and fairness.
Key Concepts
EPR (Economic Pulse Ratio): measures real-time economic “heartbeat” (liquidity vs equilibrium).
PAI (Paudelian Anchor Index): the moral and mathematical anchor of value.
SIR (Spontaneous Interest Rate): the self-adjusting rate guided by feedback, not decree.
k: a dynamic sensitivity coefficient, driven by behavioral and algorithmic intelligence (Socio-Psychological Factor; eg, pandemics, war, etc.). In fact, k is a simplified expression of f(x, y, z, …).
r: the structural base factor (Keynesian core).
Applications
When integrated with digital currency ledgers, PuFF can autonomously calibrate monetary conditions:
Adjust interest rates in real-time as liquidity flows.
React to psychological and behavioral data (via AI-driven $k$).
Provide ethical transparency and system stability in digital economies.
Implication for Central Banks
CBDC systems operating under PuFF gain the ability to:
Detect instability before it spreads.
Auto-balance liquidity with policy responsiveness.
Implement AI-augmented monetary governance — where feedback replaces political intervention.
Citation
Paudel, R. (2025). The Paudelian Feedback Framework (PuFF) in CBDC Simulations. Paudelian Economics Institute.