Arbeitspapier
CBDC and financial stability
What is the effect of Central Bank Digital Currency (CBDC) on financial stability? We answer this question by studying a model of financial intermediation with an endogenously determined probability of a bank run, using global games. As an alternative to bank deposits, consumers can also store their wealth in remunerated CBDC issued by the central bank. Consistent with widespread concerns among policymakers, higher CBDC remuneration increases the withdrawal incentives of consumers, and thus bank fragility. However, the bank optimally responds to the additional competition by offering better deposit rates to retain funding, which reduces fragility. Thus, the overall relationship between CBDC remuneration and bank fragility is U-shaped.
- ISBN
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978-92-899-5525-6
- Language
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Englisch
- Bibliographic citation
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Series: ECB Working Paper ; No. 2783
- Classification
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Wirtschaft
Asymmetric and Private Information; Mechanism Design
Financial Crises
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- Subject
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Central Bank Digital Currency
Bank Fragility
Demand Deposits
Global Games
- Event
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Geistige Schöpfung
- (who)
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Ahnert, Toni
Hoffmann, Peter
Leonello, Agnese
Porcellacchia, Davide
- Event
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Veröffentlichung
- (who)
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European Central Bank (ECB)
- (where)
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Frankfurt a. M.
- (when)
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2023
- DOI
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doi:10.2866/671223
- Handle
- Last update
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10.03.2025, 11:42 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Ahnert, Toni
- Hoffmann, Peter
- Leonello, Agnese
- Porcellacchia, Davide
- European Central Bank (ECB)
Time of origin
- 2023