Central bank digital currency and systemic risk

Rizwan, Muhammad Suhail; Ahmad, Ghufran; Qureshi, Anum

Abstract

Central Bank Digital Currency (CBDC) is an emerging Financial Technology (FinTech) area. Several countries are involved in CBDC development at different stages and a few are already in the launching stage. We use the autoregressive distributed lag approach to explore the association between CBDC-related news and systemic risk in the short and long run by employing dynamic panel heterogeneity analysis. The results show that CBDC-related news has a significant negative association with systemic risk in the long run, indicating a positive reception by the global financial sector. Extended analysis shows that the long-run negative association is consistent across different income levels and geographical regions. However, countries in the advanced stages of CBDC development show a significant positive association between CBDC-related news and systemic risk warranting the utmost care in implementing CBDC initiatives.

Citation

Rizwan, M. S., Ahmad, G., & Qureshi, A. (2025). Central bank digital currency and systemic risk. Journal of International Financial Markets, Institutions and Money, 99, Article 102104. https://doi.org/10.1016/j.intfin.2024.102104

• Journal Article Type: Article
• Acceptance Date: Dec 14, 2024
• Online Publication Date: Dec 22, 2024
• Publication Date: Mar 1, 2025
• Deposit Date: Apr 20, 2025
• Journal: Journal of International Financial Markets, Institutions and Money
• Print ISSN: 1042-4431
• Electronic ISSN: 1873-0612
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 99
• Article Number: 102104
• DOI: https://doi.org/10.1016/j.intfin.2024.102104
• Public URL: https://durham-repository.worktribe.com/output/3793102