Assessing the Impact of Central Bank Digital Currency on Private Banks

Andolfatto, David

doi:10.1093/ej/ueaa073

Cited by 198 publications

(88 citation statements)

References 12 publications

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“…If (1= c) 1 , the constraint is not binding, which means = 1= 1 and 1 , banks are indi¤erent between any amount of capital. To be consistent with market clearing D % 1 (1= 1) (1 ) .…”

Section: A Multiplicity Under Perfect Competitionmentioning

confidence: 99%

“…with > 1 and " su¢ ciently small, the supply curve is decreasing for most part if < (1= c) 1 . This is shown in 12(c).…”

Section: A Multiplicity Under Perfect Competitionmentioning

confidence: 99%

“…Many central banks are assessing the possibility of introducing widely accessible Central Bank Digital Currency (CBDC) into their economies. 1 Issuing CBDC would have implications for monetary policy and banking. One concern is that CBDC might crowd out bank deposits, increase banks'funding costs, and reduce lending and investment, i.e., bank disintermediation.…”

Section: Introductionmentioning

confidence: 99%

“…In contrast, our model extends theirs to allow for imperfectly competitive banking sector and show CBDC can increase bank lending. 5 Andolfatto (2018), in constrast, considers an economy with a monopolistic commercial bank and shows that CBDC may have a positive e¤ect on bank deposits but no impact on bank lending if the central bank lends to the commercial bank.…”

Section: Introductionmentioning

confidence: 99%

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Central bank digital currencies: experience of pilot projects and conclusions for the NBU

Shapoval¹

2020

Ekon. prognozuvannâ

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An overview of the definitions of central bank digital currency (CBDC), formulated by researchers of the International Monetary Fund (IMF), the Bank for International Settlements (BIS), the Bank of England, is presented, and the essence of the CBDC is revealed. It is stated that the existing electronic money is a digital form of obligations of financial intermediaries, and CBDC is a form of emission and obligations of central banks. The types and forms of CBDC are generalized, namely: retail or wholesale, account-based or token-based ones. The structure and functionality of the register, payment authentication, access to infrastructure, and governance are defined as factors taken into account during CBDC designing. Similar models of launching national CBDC by the Bank of England (economy-wide access or financial institutions access, and financial institutions plus CBDC backed narrow bank access) and BIS (direct, indirect, hybrid) are under consideration. The synthetic CBDCs are marked as a theoretical concept of CBDC. The overview of projects of the People's Bank of China – "e-renminbi", the Central Bank of the Uruguay – "e-peso", the Central Bank of the Bahamas – "sand dollar" and the Eastern Caribbean Central Bank affirm the interest of developing countries in launching national retail CBDCs. It was found that apart from the Riksbank with the successful "e-krona" project, most of the monetary authorities of developed countries (BIS, Bank of Japan, Bank of Canada, Deutsche Bank, FRS) are just planning or starting to experiment with the issuance of digital securities, which demonstrates their concern about the restructuring of the banking system and the changes of global role of traditional currencies. Among the positive consequences of the introduction of CBDC for the domestic banking system are the emergence of an alternative payment instrument, the implementation of effective monetary policy through increased influence on interest rates, and regulation of the legal regime of crypto currencies. At the same time, the introduction of CBDC involves certain changes in financial intermediation (replacement of the deposits of commercial banks with the CBDC, the performance of functions inherent to commercial banks by the central bank or fintech companies), and will require powerful technical capabilities, including those related to protection from cyber risks. The results of the study point to the need for a cautious approach to the implementation of the Ukrainian CBDC only after the NBU assesses the public demand for new forms of money and the impact of the launch of CBDC models on price and financial stability, and compares available payment technologies that can achieve the same goals as the CBDC.

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“…If (1= c) 1 , the constraint is not binding, which means = 1= 1 and 1 , banks are indi¤erent between any amount of capital. To be consistent with market clearing D % 1 (1= 1) (1 ) .…”

Section: A Multiplicity Under Perfect Competitionmentioning

confidence: 99%

“…with > 1 and " su¢ ciently small, the supply curve is decreasing for most part if < (1= c) 1 . This is shown in 12(c).…”

Section: A Multiplicity Under Perfect Competitionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Central bank digital currencies: experience of pilot projects and conclusions for the NBU

Shapoval¹

2020

Ekon. prognozuvannâ

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show abstract

“…Some recent studies develop general equilibrium models to investigate the macro implications of issuing central bank digital currencies, e.g., Andolfatto (2018), Barrdear and Kumhof (2016), Chiu and Wong (2014), Chiu, Davoodalhosseini, Jiang, and Zhu (2019), Davoodalhosseini (2018), Fernández-Villaverde, Sanches, Schilling, and Uhlig (2020), Keister and Sanches (2019) and Williamson (2019). Zhu and Hendry (2019) study the competition between national currency and general-purpose electronic money.…”

Section: Introductionmentioning

confidence: 99%

Payments on Digital Platforms: Resiliency, Interoperability and Welfare

Chiu

Wong

2021

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Bank‐lending channel of monetary policy transmission in WAEMU: An estimated DSGE model approach

Babilla

2022

Int. J Fin Econ

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This article examines the effectiveness of the banking‐lending channel in the transmission of monetary policy mechanisms in the West African Economic and Monetary Union. We estimated a Dynamic Stochastic General Equilibrium model with an incomplete credit market, where the financial system is based on an active banking sector and the central bank follows a fixed exchange rate regime, using quarterly data from 1985Q1 to 2020Q4. Findings reveal that, first, monetary policy induces an expansionary effect in the real economy when the banking sector loosens borrowing constraints. Second, we found that the banking sector is sensitive to the contraction of monetary policy via its effects on lending rates and deposit rates. Third, findings show that the bank‐lending channel amplifies and propagates monetary policy transmission mechanisms into the real economy. The counterfactual analysis demonstrates that the level of financial depth within the currency union enhances the efficiency of the bank‐lending channel of the monetary policy transmission mechanism. The macroeconomic outcomes and the financial implications of monetary policy via bank‐lending channels are more accentuated for the economies of the currency union with more financial depth than for those with shallow financial sector depth.

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Assessing the Impact of Central Bank Digital Currency on Private Banks

Cited by 198 publications

References 12 publications

Central bank digital currencies: experience of pilot projects and conclusions for the NBU

Central bank digital currencies: experience of pilot projects and conclusions for the NBU

Payments on Digital Platforms: Resiliency, Interoperability and Welfare

Bank‐lending channel of monetary policy transmission in WAEMU: An estimated DSGE model approach

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