Central Bank Digital Currency: When Price and Bank Stability Collide
summary
Defines an account-based CBDC and builds a nominal banking model on Diamond‑Dybvig (three periods, commitment equilibria) to show a CBDC trilemma: a central bank cannot simultaneously deliver price stability, implement the social‑optimal risk‑sharing allocation, and deter runs. A run‑deterring policy (liquidate less when deposits surge) can implement the optimum but requires credible inflation threats; strict price‑stability caps prevent the optimum but stop runs; partial stability creates dual equilibria (good no‑run and bad run).
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chapters (14)
- 0:00Introduction
- 5:25Conflicts of Interest
- 10:40Diamond Diploid Model
- 18:15Nominal Contracts
- 21:30Price Levels
- 26:05Equilibrium Definition
- 28:27Central Bank Run
- 31:39Recall
- 34:34Main Result
- 39:20Price Stability
- 40:26P1 Stable Policy
- 44:25Conclusion
- 46:00Bank Rounds
- 48:42Central Bank Research
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