Séminaire KTO-GREDEG-OFCE - Mariana Rojas Breu (Université Paris-Dauphine)

Central Bank Account For All: Efficiency and Stability
Quand ? Le 13-02-2020,
de 14:00 à 15:30
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Mariana Rojas Breu (Université Paris-Dauphine)

Title: “Central Bank Account For All: Efficiency and Stability

Co-authors: Cyril Monnet (Bank for International Settlements, Asgerdur Petursdottir (University of Bath)

Abstract: This paper analyzes the implications for the banking sector and the real economy of introducing a central bank digital currency. We consider a central bank digital currency that is potentially interest bearing and competes with bank deposits; i.e., agents can use both currency and bank deposits to conduct transactions in the goods market. Banks are endowed with an investment technology and a monitoring technology. Banks’ monitoring choices determine the level of riskiness of their investment. Because monitoring is costly for banks, the level of monitoring is inefficiently low from a social point of view. We show that the introduction of an interest-bearing central bank digital currency can force banks to increase their monitoring level, hence reducing their risk taking and resulting in increased output. The introduction of a central bank digital currency is generally welfare improving.

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