Central Bank Digital Currency, Flight-to-Quality, and Bank-Runs in an Agent-Based Model

Emilio Barucci, Andrea Gurgone, Giulia Iori () and Michele Azzone
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Emilio Barucci: Politecnico di Milano
Andrea Gurgone: University of Oxford
Giulia Iori: Ca’ Foscari University of Venice; University of London
Michele Azzone: Politecnico di Milano

No 2026: 01, Working Papers from Department of Economics, University of Venice "Ca' Foscari"

Abstract: We analyse financial stability and welfare impacts associated with the introduction of a Central Bank Digital Currency (CBDC) in a macroeconomic agent-based model. The model considers firms, banks, and households interacting on labour, goods, credit, and interbank markets. Households move their liquidity from deposits to CBDC based on the perceived riskiness of their banks. We find that the introduction of CBDC exacerbates bank-runs and may lead to financial instability phenomena. The effect can be changed by introducing a limit on CBDC holdings. The adoption of CBDC has little effect on macroeconomic variables but the interest rate on loans to firms goes up and credit goes down in a limited way. CBDC leads to a redistribution of wealth from firms and banks to households with a higher bank default rate. CBDC may have negative welfare effects, but a bound on holding enables a welfare improvement.

Keywords: Agent-Based Model; Central Bank Digital Currency; Financial Stability; Bank-run (search for similar items in EconPapers)
JEL-codes: E42 E44 E47 E52 E58 G01 G21 G28 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2026
New Economics Papers: this item is included in nep-mon
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