Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/299278 
Year of Publication: 
2023
Series/Report no.: 
Sveriges Riksbank Working Paper Series No. 424
Publisher: 
Sveriges Riksbank, Stockholm
Abstract: 
Central banks have been considering the introduction of central bank digital currencies (CBDCs). The theoretical literature indicates that this may influence private banks' lending activity and their profitability with implications for financial stability. To provide empirical evidence on this debate, we study the effects of the arrival of a new central-bank issued currency on commercial banks in a historical setup. We use the opening of the Bank of Canada in 1935 as a natural experiment to provide evidence that banks mostly affected by the currency competition experienced lower profitability but did not decrease their lending compared to unaffected peers
Subjects: 
Money and Banking
Central Bank Digital Currencies
Central Banks
Bank Profitability
Bank Lending
Bank of Canada
Banknote Monopoly
JEL: 
E42
E5
G21
G28
N22
Document Type: 
Working Paper

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