EconPapers    
Economics at your fingertips  
 

Digital currencies in financial networks

Olli Castrén, Ilja Kristian Kavonius () and Michela Rancan

Journal of Financial Stability, 2022, vol. 60, issue C

Abstract: We introduce a central bank digital currency (CBDC) in the network of financial accounts. Simulating a shift of deposits by both households and non-financial corporations from the banking sector to the central bank, we model the different responses of the affected institutional sectors. We find that the introduction of CBDC generates funding shortages in banks, which may propagate to other sectors. In addition, significant adjustments in the balance sheets of all sectors trigger large moves in securities prices and induce changes in the financial network structure. Finally, we extend the analysis to the introduction of a crypto financial asset (stablecoin) issued by either a domestic or a foreign entity.

Keywords: Digital currency; CBDC; Stablecoins; Macro-network; Financial intermediation; Financial stability (search for similar items in EconPapers)
JEL-codes: E58 G21 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1572308922000286
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: https://EconPapers.repec.org/RePEc:eee:finsta:v:60:y:2022:i:c:s1572308922000286

DOI: 10.1016/j.jfs.2022.101000

Access Statistics for this article

Journal of Financial Stability is currently edited by I. Hasan, W. C. Hunter and G. G. Kaufman

More articles in Journal of Financial Stability from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2022-09-12
Handle: RePEc:eee:finsta:v:60:y:2022:i:c:s1572308922000286