We shed light on the demand for a central bank digital currency (CBDC) as a means of payment, based on survey payment data. We provide a quantitative framework to assess transactional demand for CBDC at the point of sale, accommodating a wide range of design choices. We develop a structural model of payment means adoption and usage and estimate CBDC demand based on individuals’ preferences for payment method attributes.
We shed light on the demand for a central bank digital currency (CBDC) as a means of payment, based on survey payment data. We provide a quantitative framework to assess transactional demand for CBDC at the point of sale, accommodating a wide range of design choices. We develop a structural model of payment means adoption and usage and estimate CBDC demand based on individuals’ preferences for payment method attributes.
This paper discusses the impact that a retail central bank digital currency (CBDC) could have on the implementation of monetary policy. Monetary policy implementation could be affected if the introduction of the retail CBDC changes the volume of commercial bank deposits held by customers, which would, in turn, affect central bank reserves. While it is often assumed that customer deposits would decrease if a CBDC was introduced, we provide arguments why this is by no means clear cut and deposits could even increase.
This paper extends Boone (2008) by introducing a competition measure at the individual firm level rather than for an entire market segment. It is based on the elasticity between profits and efficiency and called marginal relative profitability (MRP). Its intuition is that when a small change in efficiency derived from marginal costs can cause a large change in profits, a firm exercises pressure on its peers and gains profits. The MRP is embedded in the theoretical framework of Boone and measures competition vis-à-vis other market participants.
Investment funds hold a disproportionately larger fraction of domestic relative to foreign stocks. Stock market development and familiarity (language and distance) are considered key determinants for home bias. The literature neglects however that investors often invest in foreign funds domiciled in financial centers. We use a “look-through approach” to account for this misclassification. First, we find substantially smaller home bias estimates compared to those in the literature. Second, the explanatory power of plausible home bias determinants is lower than previously documented.
This paper extends Boone (2008) by introducing a competition measure at the individual firm level rather than for an entire market segment. It is based on the elasticity between profits and efficiency and called marginal relative profitability (MRP). Its intuition is that when a small change in efficiency derived from marginal costs can cause a large change in profits, a firm exercises pressure on its peers and gains profits. The MRP is embedded in the theoretical framework of Boone and measures competition vis-à-vis other market participants.
Investment funds hold a disproportionately larger fraction of domestic relative to foreign stocks. Stock market development and familiarity (language and distance) are considered key determinants for home bias. The literature neglects however that investors often invest in foreign funds domiciled in financial centers. We use a “look-through approach” to account for this misclassification. First, we find substantially smaller home bias estimates compared to those in the literature. Second, the explanatory power of plausible home bias determinants is lower than previously documented.
This box summarises the findings of recent contacts between ECB staff and representatives of 57 leading non-financial companies operating in the euro area. According to these exchanges, which took place between 11 and 19 March 2024, aggregate activity was subdued at the start of the year, but there were some signs of a pick-up in demand and expectations of a gradual, albeit modest, recovery in the course of the year. Growth in selling prices picked up slightly in the first months of the year, owing mainly to a slight rebound in the prices of some intermediate goods and services.
How a historic drop in bank deposits shapes banks’ loan supply? We exploit the effects of a large, and unexpected, increase in monetary policy rates to estimate the deposit channel of monetary policy using an extensive credit register that includes all bank-firm lending relationships in all euro area countries. We find that banks experiencing large deposit outflows reduce credit, but not the interest rate they charge, to the same borrower relative to other lenders. This credit restriction is stronger for fixed rate and longer maturity loans, but not for riskier borrowers.
How a historic drop in bank deposits shapes banks’ loan supply? We exploit the effects of a large, and unexpected, increase in monetary policy rates to estimate the deposit channel of monetary policy using an extensive credit register that includes all bank-firm lending relationships in all euro area countries. We find that banks experiencing large deposit outflows reduce credit, but not the interest rate they charge, to the same borrower relative to other lenders. This credit restriction is stronger for fixed rate and longer maturity loans, but not for riskier borrowers.
