webinar register page

Webinar banner
Toni Whited (Michigan) presents, hosted by Lin William Cong (Cornell)
Toni Whited (University of Michigan)

Lin William Cong (Cornell University)

Will Central Bank Digital Currency Disintermediate Banks?

This paper studies how introducing a central bank digital currency (CBDC) can affect the banking system. We show that a CBDC need not reduce bank lending unless frictions and synergies bind deposits and lending. We estimate a dynamic banking model to quantify the role of these frictions in shaping the impact of a CBDC on the banking system. Our counterfactual analysis shows that a CBDC can replace a significant fraction of bank deposits, especially when it pays interest. However, a CBDC has a much smaller impact on bank lending because banks can replace a large fraction of lost deposits with wholesale funding. Substitution with wholesale funding makes banks' funding costs more sensitive to changes in short-term rates, increasing their exposure to interest rate risk. We also show that a CBDC amplifies the impact of monetary policy shocks on bank lending.

Apr 6, 2023 11:00 AM in Eastern Time (US and Canada)

* Required information


Toni Whited
Dale L. Dykema Professor of Business Administration and Professor of Finance @University of Michigan
Toni Whited is the Dale L. Dykema Professor of Business Administration at the University of Michigan. Professor Whited received her B.A. in economics and French, summa cum laude, from the University of Oregon in 1984 and her Ph.D. in economics from Princeton in 1990, working with Ben Bernanke. Professor Whited has published over 40 articles in top-tier economics and finance journals. Her research covers topics such as the effects of financial frictions on corporate investment, econometric solutions for measurement error, corporate cash policy, structural estimation of dynamic models, monetary policy, and corporate diversification. She has won a Jensen Prize for one of the top articles in corporate finance in the Journal of Financial Economics and twice won a Brattle Prize for one of the top articles in the Journal of Finance in corporate finance. She is the past-president of the Western Finance Association, and she serves as editor-in-chief for the Journal of Financial Economics.