Fintech Thrust Seminar | Will Central Bank Digital Currency Disintermediate Banks?
Supporting the below United Nations Sustainable Development Goals:支持以下聯合國可持續發展目標：支持以下联合国可持续发展目标：
Will Central Bank Digital Currency Disintermediate Banks?
Abstract:
This paper studies how introducing a central bank digital currency (CBDC) can affect the banking system. We show that a CBDC need not reduce bank lending unless frictions and synergies bind deposits and lending. We estimate a dynamic banking model to quantify the role of these frictions in shaping the impact of a CBDC on the banking system. Our counterfactual analysis shows that a CBDC can replace a significant fraction of bank deposits, especially when it pays interest. However, a CBDC has a much smaller impact on bank lending because banks can replace a large fraction of lost deposits with wholesale funding. Substitution with wholesale funding makes banks' funding costs more sensitive to changes in short-term rates, increasing their exposure to interest rate risk. We also show that a CBDC amplifies the impact of monetary policy shocks on bank lending.
Link to Paper: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4112644
Kairong Xiao is an associate professor of finance at Columbia Business School. His research interests span financial intermediation, corporate finance, industrial organization, and political economy. His research papers have been published in top finance and economics journals, including the Journal of Finance, the Review of Financial Studies, Econometrica, the Journal of Monetary Economics, and Management Science. He received numerous awards for research excellence, including the Review of Financial Studies Rising Scholar Award, the Journal of Finance Dimensional Fund Advisors Prize for Distinguished Paper, and the Review of Financial Studies Best Paper Award runner-up.