Download full text
(888.1Kb)
Citation Suggestion
Please use the following Persistent Identifier (PID) to cite this document:
https://nbn-resolving.org/urn:nbn:de:0168-ssoar-90145-8
Exports for your reference manager
Will Central Bank Digital Currency Disintermediate Banks?
[working paper]
Corporate Editor
Institut für Höhere Studien (IHS), Wien
Abstract We estimate a dynamic banking model to quantify the impact of a central bank digital currency (CBDC) on the banking system. Our counterfactuals show that a one-dollar introduction of CBDC replaces bank deposits by around 80 cents on the margin. Bank lending falls by one-fourth of the drop in deposit... view more
We estimate a dynamic banking model to quantify the impact of a central bank digital currency (CBDC) on the banking system. Our counterfactuals show that a one-dollar introduction of CBDC replaces bank deposits by around 80 cents on the margin. Bank lending falls by one-fourth of the drop in deposits because banks partially replace lost deposits with wholesale funding. This substitution raises banks’ interest-rate risk exposure and lowers their resilience to negative equity shocks. If CBDC bears interest or is intermediated through banks, it captures a greater deposit market share, amplifying the impact on lending. The effect on lending is amplified for small banks, for which wholesale funding is more expensive.... view less
Keywords
central bank; digitalization; currency; currency policy; competition; stability; lending
Classification
Economic Policy
Free Keywords
central bank digital currency; banking competition; maturity mismatch; financial stability
Document language
English
Publication Year
2023
City
Wien
Page/Pages
55 p.
Series
IHS Working Paper, 47
Status
Published Version; reviewed