SMU SOE Seminar (April 12, 2023): Bank Market Power and Central Bank Digital Currency: A Case of Imperfect Substitution

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ABSTRACT This paper studies the effect of a central bank digital currency (CBDC) on bank intermediation when the CBDC is an imperfect substitute for bank deposits and the deposit market is imperfectly competitive. We show that a CBDC can promote bank intermediation and output if the CBDC rate is in some intermediate range. A CBDC that is a better substitute has larger positive effects. It can raise lending and output by more. It starts to increase lending and output at a lower interest rate and it promotes intermediation and output for a wider range of interest rates. Therefore, to better reap the benefit of a CBDC, it should be designed as a close substitute to bank deposits. Click here to view the CV.
		PRESENTER Yu Zhu Renmin University of China
		RESEARCH FIELDS Monetary Economics Digital Currency Theoretical Econometrics Applied Econometrics Empirical Auctions
		DATE: 12 April 2023 (Wednesday)
		TIME: 4pm - 5.30pm
		VENUE: Meeting Room 5.1, Level 5 School of Economics Singapore Management University 90 Stamford Road Singapore 178903