Consumer bank runs in a world of central bank backed digital currency

Sammanfattning: This exploratory paper is intended to improve understanding of the potential effects of the implementation of E-krona or similar CBDC's, with emphasis on financial stability. Our proposed experiment measures the impact of instant or delayed withdrawals in a modified Diamond-Dybvig setup, where participants are exposed to changes in liquidity of their bank. We also propose running treatments of the experiment with deposit insurance, in order to explore how increased consumer liquidity may affect current deposit insurance policy. Our preliminary hypotheses indicate that an introduction of E-krona might decrease the stability of the financial system. They also indicate that current deposit insurance might not be sufficiently efficient in this new context of CBDC's.