Private Bank Money vs Central Bank Money: A Historical Lesson for CBDC Introduction

Anna Grodecka-Messi and Xin Zhang ()
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Xin Zhang: Research Department, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden

No 424, Working Paper Series from Sveriges Riksbank (Central Bank of Sweden)

Abstract: Central banks have been considering the introduction of central bank digital currencies (CBDCs). The theoretical literature indicates that this may influence private banks’ lending activity and their profitability with implications for financial stability. To provide empirical evi dence on this debate, we study the effects of the arrival of a new central-bank issued currency on commercial banks in a historical setup. We use the opening of the Bank of Canada in 1935 as a natural experiment to provide evidence that banks mostly affected by the currency competition experienced lower profitability but did not decrease their lending compared to unaffected peers.

Keywords: Money and Banking; Central Bank Digital Currencies; Central Banks; Bank Profitability; Bank Lending; Bank of Canada; Banknote Monopoly (search for similar items in EconPapers)
JEL-codes: E42 E50 G21 G28 N22 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2023-06-01, Revised 2023-07-01
New Economics Papers: this item is included in nep-ban, nep-cba, nep-fdg, nep-fmk, nep-his, nep-mon and nep-pay
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Related works:
Journal Article: Private bank money vs central bank money: A historical lesson for CBDC introduction (2023)
Working Paper: Private Bank Money vs Central Bank Money: A Historical Lesson for CBDC Introduction (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:rbnkwp:0424

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