Central Bank Digital Currencies: Experimental Evidence of Deposit Conversion

Shakina Ekaterina, Hanke Michael and Ellis Scott ()
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Shakina Ekaterina: Newcastle Business School, Northumbria University, Newcastle upon Tyne, NE1 8ST, UK
Hanke Michael: University of Liechtenstein, Fürst-Franz-Josef-Strasse, 9490 Vaduz, Liechtenstein
Ellis Scott: Newcastle Business School, Northumbria University, Newcastle upon Tyne, NE1 8ST, UK

The B.E. Journal of Economic Analysis & Policy, 2025, vol. 25, issue 1, 127-137

Abstract: In this paper, we provide unique experimental evidence of depositors’ behaviour in presence of a possibility to convert commercial bank deposits into central bank digital currency (CBDC). Theoretically and experimentally we analyse whether such an option incentivises bank runs. We find that the availability of the deposit conversion option does not lead to a significant outflow of deposits. However, when conversion is restricted, depositors are eager to actively use it as a coordination tool. These findings highlight the importance of considering coordination and decision time in determining the choice to convert deposits into CBDC. Our study evidences that policy-makers should balance accessibility and control measures to maintain financial stability, ensuring that CBDC implementation supports the resilience of the banking system.

Keywords: central bank digital currencies; bank runs; experiment (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1515/bejeap-2024-0192

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