Pré-Publication, Document De Travail Année : 2025

Central Bank Digital Currency and Bank Risk: Welfare and Policy Implications

Résumé

We study the effect introducing interest-bearing central bank digital currency (CBDC) has on bank intermediation, risk-taking and welfare. We model a CBDC that competes with bank deposits as a medium of exchange. Monopolistic banks issue deposits to lend to productive investment projects. CBDC does not lead to disintermediation, but it can distort bankers' investment decisions. To retain risk-averse depositors, banks need to compete with a risk-free asset (CBDC), which leads them to adjust their risk exposure and hold a safer loan portfolio. This can lead to overinvestment in risk-free (less productive) loans which is sub-optimal from a social point of view. If depositors are highly risk averse and risk-free projects are scarce in the economy, a CBDC that bears interest may lead to an overall welfare loss. Interest rate on reserves then becomes an important policy tool to crowd-out sub-optimal investment and mitigate banking sector risk.
Fichier principal
Vignette du fichier
wp_cred_2025_02.pdf (751) Télécharger le fichier
Origine Fichiers produits par l'(les) auteur(s)

Dates et versions

hal-04941246 , version 1 (11-02-2025)

Licence

Identifiants

  • HAL Id : hal-04941246 , version 1

Citer

Cyril Monnet, Asgerdur Petursdottir, Mariana Rojas-Breu. Central Bank Digital Currency and Bank Risk: Welfare and Policy Implications. 2025. ⟨hal-04941246⟩
0 Consultations
0 Téléchargements

Partager

More