[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/imf/imfwpa/2023-236.html
   My bibliography  Save this paper

Central Bank Digital Currency and Bank Disintermediation in a Portfolio Choice Model

Author

Listed:
  • Huifeng Chang
  • Federico Grinberg
  • Lucyna Gornicka
  • Mr. Marcello Miccoli
  • Brandon Tan
Abstract
Would the introduction of a Central Bank Digital Currency (CBDC) lead to lower deposits (disintermediation) and lending in the banking sector? This paper develops a model where households heterogeneous in wealth allocate between an illiquid asset and assets that can be used for payments: bank deposits, cash, and CBDC. CBDC is more efficient as a means of payment and has lower access cost than deposits. Deposits are offered by an imperfectly competitive banking sector which raises deposit interest rates after CBDC introduction to prevent substitution away from deposits to CBDC. We find that there are two opposing margins of impact on the level of aggregate deposits: (1) the intensive margin gain in deposits by richer households increasing their holdings of deposits because of higher interest rates, and (2) the extensive margin loss of deposits among poorer households who switch from deposits to the CBDC. The extensive margin loss in deposits is more likely to dominate (yielding a fall in aggregate deposits) when the mass of poorer households is large and when it is relatively costly to access bank accounts. This tends to be the case in developing and emerging market economies. However, even when the extensive margin loss of deposits dominates and there is disintermediation, the impact on lending is quantitatively small if banks have access to other forms of funding, such as wholesale or central bank financing.

Suggested Citation

  • Huifeng Chang & Federico Grinberg & Lucyna Gornicka & Mr. Marcello Miccoli & Brandon Tan, 2023. "Central Bank Digital Currency and Bank Disintermediation in a Portfolio Choice Model," IMF Working Papers 2023/236, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2023/236
    as

    Download full text from publisher

    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=541607
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    CBDC; banking disintermediation; financial inclusion; monetary policy; CBDC introduction; bank disintermediation; introduction of a Central Bank Digital Currency; margin loss; lending in the banking sector; Central Bank digital currencies; Bank deposits; Deposit rates; Bank credit;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:2023/236. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Akshay Modi (email available below). General contact details of provider: https://edirc.repec.org/data/imfffus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.