Digital Currencies in Financial Networks
50 Pages Posted: 17 Dec 2020
Date Written: June 15, 2020
We introduce a digital currency, either as a central bank digital currency (CBDC) or a financial crypto asset (stablecoin), in the network of financial accounts. Simulating a shift of deposits by both households and non-financial corporations from the banking sector to the digital currency, we model the different responses of the affected institutional sectors. We find that the introduction of a digital currency generates significant adjustments in the balance sheets of all sectors, may trigger large moves in securities prices and induces changes in the network structure. The economic impacts vary depending on the design of the digital innovation, the size of the deposit shift, the channels through which the balance sheet adjustments take place and the timing of the initiative.
Keywords: Digital Currency, Central Bank Digital Currency, Stablecoins, Macro-network, Financial Intermediation, Financial Stability
JEL Classification: G21, E58
Suggested Citation: Suggested Citation