Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/322484 
Year of Publication: 
2025
Series/Report no.: 
CESifo Working Paper No. 11922
Publisher: 
CESifo GmbH, Munich
Abstract: 
This paper examines the role of Central Bank Digital Currency (CBDC) in a monetary model in which fundamental-based bank runs arise endogenously. We demonstrate that introducing a CBDC designed to replicate the properties of cash displaces physical cash and, when offered at a sufficiently attractive rate, can increase the likelihood of a bank run. In contrast, when the CBDC is designed to resemble bank deposits, cash, CBDC, and deposits can coexist as media of exchange, and a high CBDC rate can eliminate the risk of runs. We further characterize the optimal CBDC policy within this framework.
Subjects: 
monetary equilibrium
bank run
CBDC
JEL: 
E42
E58
G21
Document Type: 
Working Paper
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