Economics at your fingertips  

The crowding-out effect of central bank digital currencies: A simple and generalizable payment portfolio model

Wenlong Bian, Yang Ji and Peng Wang

Finance Research Letters, 2021, vol. 43, issue C

Abstract: We construct a simple and generalizable payment portfolio model to examine the potential crowding-out effect of Central Bank Digital Currencies (CBDC) on bank deposits. Specifically, economic agents choose among cash, deposits, and CBDC to maximize the utility while satisfying their basic payment needs. Our model shows that, under the certain condition, agents have demand for CBDC and reduce the holdings of cash and deposits at the same time. The issuance of CBDC is a double-edged sword: the benefit of replacing physical cash for a more efficient payment system comes at the cost of disrupting the deposit base for commercial banks.

Keywords: CBDC; Payment portfolio model; Crowding-out effect (search for similar items in EconPapers)
JEL-codes: E41 E58 G20 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.1016/

Access Statistics for this article

Finance Research Letters is currently edited by R. Gençay

More articles in Finance Research Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

Page updated 2022-03-12
Handle: RePEc:eee:finlet:v:43:y:2021:i:c:s154461232100091x