CBDC need not pose stability threat – paper

Digital currency

The creation of a retail central bank digital currency (CBDC) will not necessarily undermine the stability of the banking sector, say Markus Brunnermeier and Dirk Niepelt in a new paper.

The authors set out a model of money, liquidity and financial frictions in the working paper, published by the National Bureau of Economic Research.

The framework suggests some “frequently-made arguments” about CBDC are “questionable”, Brunnermeier and Niepelt write. If the central bank is strongly committed

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