What is the effect of Central Bank Digital Currency (CBDC) on financial stability? We answer this question by studying a model of financial intermediation with an endogenously determined probability of a bank run, using global games. As an alternative to bank deposits, consumers can also store...

What is the effect of Central Bank Digital Currency (CBDC) on financial stability? We answer this question by studying a model of financial intermediation with an endogenously determined probability of a bank run, using global games. As an alternative to bank deposits, consumers can also store...

Shocks to banks' ability to raise liquidity at short notice can lead to depositor panics, as evidenced by recent bank failures. Why don't banks take a more active role in managing these risks? In a standard bank-run model, we show that risk management failures are most prevalent when exposures...