Central Bank Digital Currency and Banking Choices

Jiaqi Li, Andrew Usher and Yu Zhu
Authors registered in the RePEc Author Service: Tao Li

Staff Working Papers from Bank of Canada

Abstract: To what extent does a central bank digital currency (CBDC) compete with bank deposits? To answer this question, we develop and estimate a structural model where each household chooses which financial institution to deposit their digital money with. Households value the interest paid on digital money, the possibility of obtaining complementary financial products, and the access to in-branch services. A non-interest-bearing CBDC that does not provide complementary financial products can substantially crowd out bank deposits only if it provides an extensive service network. Imposing a large limit on CBDC holding would effectively mitigate this crowding out.

Keywords: Central bank research; Digital currencies and fintech (search for similar items in EconPapers)
JEL-codes: E50 E58 (search for similar items in EconPapers)
Pages: 63 pages
Date: 2024-02
New Economics Papers: this item is included in nep-ban, nep-cba, nep-fdg, nep-mon and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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