Universitat Autònoma de Barcelona
2022
The aim of this study is to disentangle the effects of introducing an interest-bearing central bank digital currency (CBDC) for financial stability using a Diamond and Dybvig (1983) model in which (i) both CBDC and private bank deposits can be used in exchange and (ii) liquidity is created endogenously. Agents have direct access to a CBDC via deposits at the central bank. They use both sight deposits and CBDC deposits to buy goods and commercial banks borrow reserves to cover liquidity needs. The introduction of an interest-bearing CBDC has direct implications on the sight deposits rate and on the loan rate of banks. Besides, if the central bank aims at having a positive net worth and the absence of bank runs, a high supply of a CBDC is a necessary condition to achieve both objectives. If this is not provided, it will endanger financial stability.
Working paper
Anglès
Bellaterra
open access
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