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.

Digital currencies in financial networks / O. Castren, I.K. Kavonius, M. Rancan. - In: JOURNAL OF FINANCIAL STABILITY. - ISSN 1572-3089. - 60:(2022), pp. 101000.1-101000.14. [10.1016/j.jfs.2022.101000]

Digital currencies in financial networks

M. Rancan
Ultimo
2022

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.
CBDC; Digital currency; Financial intermediation; Financial stability; Macro-network; Stablecoins
Settore SECS-P/11 - Economia degli Intermediari Finanziari
Settore SECS-P/01 - Economia Politica
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/2434/941374
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