American Economic Journal:
Macroeconomics
ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)
The Optimal Quantity of CBDC in a Bank-Based Economy
American Economic Journal: Macroeconomics
vol. 16,
no. 4, October 2024
(pp. 172–217)
Abstract
We show that the estimated effect of digital euro news on bank stock valuations and lending depends on the bank's deposit reliance and the central bank digital currency (CBDC) design features. Using a quantitative DSGE model calibrated to the euro area economy that replicates such evidence, we find that CBDC issuance yields nontrivial welfare trade-offs between, on one side, the positive expansion of liquidity services and the improved stabilization of deposit funding and lending and, on the other side, a negative bank disintermediation effect. The optimal amount of CBDC lies between 15 and 45 percent of quarterly GDP.Citation
Burlon, Lorenzo, Manuel A. Muñoz, and Frank Smets. 2024. "The Optimal Quantity of CBDC in a Bank-Based Economy." American Economic Journal: Macroeconomics, 16 (4): 172–217. DOI: 10.1257/mac.20220152Additional Materials
JEL Classification
- E23 Macroeconomics: Production
- E42 Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems
- E58 Central Banks and Their Policies
- F33 International Monetary Arrangements and Institutions
- G14 Information and Market Efficiency; Event Studies; Insider Trading
- G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
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