The Optimal Quantity of CBDC in a Bank-Based Economy

Lorenzo Burlon, Manuel A. Muñoz and Frank Smets

American Economic Journal: Macroeconomics, 2024, vol. 16, issue 4, 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.

JEL-codes: E23 E42 E58 F33 G14 G21 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (3)

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Related works:
Working Paper: The optimal quantity of CBDC in a bank-based economy (2023)
Working Paper: The optimal quantity of CBDC in a bank-based economy (2022)
Working Paper: The optimal quantity of CBDC in a bank-based economy (2022)
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DOI: 10.1257/mac.20220152

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