Could the Issuance of CBDC Reduce the Likelihood of Banking Panic?

Soraya BEN Souissi () and Mahmoud Nabi
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Soraya BEN Souissi: University of Carthage, LEGI-Tunisia Polytechnic School and FSEG Nabeul, Tunisia

Journal of Central Banking Theory and Practice, 2023, vol. 12, issue 2, 83-101

Abstract: This paper delves into the relationship between the issuance of Central Bank Digital Currencies (CBDC) and the likelihood of banking panic. The issuance of CBDC acts as a disturbing shock that incentivizes depositors to withdraw all/part of their deposits from the commercial banks, to swap it for CBDC which are offered by the central bank. We determine a variety of tools that central banks can use in order for the issuance of CBDC to act as a stabilizing factor of the banking system (by reducing the likelihood of banking panic).

Keywords: Central bank digital currency; liquidity; financial stability. (search for similar items in EconPapers)
JEL-codes: E31 E42 G11 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:cbk:journl:v:12:y:2023:i:2:p:83-101

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