CBDC need not pose stability threat – paper

Markus Brunnermeier and Dirk Niepelt say some arguments about CBDCs are “questionable”

currency-mechanism

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 US National Bureau of Economic Research.

The framework suggests some “frequently made arguments” about CBDCs are “questionable”, Brunnermeier and Niepelt write.

If the central bank is strongly

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