The Optimal Quantity of CBDC in a Bank-Based Economy

Burlón, Lorenzo; Montes-Galdón, Carlos; Muñoz, Manuel; Smets, Frank

doi:10.2139/ssrn.4175853

Cited by 25 publications

(18 citation statements)

References 42 publications

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“…More closely related to our study, Burlon et al (2022) provide some empirical evidence on the potential impact of digital euro news on bank stock prices and lending behaviour, subsequently calibrating a DSGE model. Regarding bank profitability, they find that there is a substantial heterogeneity when considering the business model of the banks.…”

Section: Introductionmentioning

confidence: 82%

Bank Profitability and Central Bank Digital Currency

Bellia

Calès

2023

SSRN Journal

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Section: Introductionmentioning

confidence: 82%

Bank Profitability and Central Bank Digital Currency

Bellia

Calès

2023

SSRN Journal

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“…The propensity to migrate bank deposit to CBDC deposit will also increase when there is high uncertainty about bank survival during a financial crisis (Kumhof and Noone, 2018). Bank disintermediation will increase funding cost and liquidity risk of banks and may trigger financial instability (Burlon et al , 2022). Meanwhile, bank disintermediation will benefit the central bank and give the central bank an unfair competitive advantage in the market for deposits (Bindseil, 2020).…”

Section: Channels Through Which Central Bank Digital Currency Affects...mentioning

confidence: 99%

Central bank digital currency and bank earnings management using loan loss provisions

Ozili¹

2023

DPRG

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Purpose This paper aims to analyse the role of central bank digital currency (CBDC) in bank earnings management and focus on how CBDC activity might influence banks to engage in accrual earnings management using loan loss provisions (LLPs) and the implications for earnings quality. Design/methodology/approach The paper used conceptual discourse analysis to explain the role of CBDC in bank earnings management. Findings Banks will use accruals, such as LLPs, to manage earnings when CBDC-induced bank disintermediation leads to a reduction in bank deposits, a reduction in bank lending and a likely reduction in reported earnings. Bank managers will mitigate the reduction in reported earnings by lowering discretionary LLPs to increase reported earnings. Originality/value The recent emergence of CBDC in the digital currency universe has led to increased research interest on the role of CBDC in corporations and society. This study contributes to the literature by focusing on banks, and examining the effect of CBDC on bank earnings management.

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“…Thus, they do not quantify the expected demand, nor the effects for profits, reserve dynamics, etc., in an explicit way as we wish to do. Burlon et al (2022) provides estimates of an optimal CBDC volume. 6 Klein (1971, p. 218) calls his model a "microeconomic model of the banking firm."…”

Section: Literaturementioning

confidence: 99%