Eric Monnet, Angelo Riva, Stefano Ungaro, 01 May 2021

One of the concerns in the debate on central bank digital currency is whether the ability for depositors to hold an account at the central bank could trigger a run on the banking system. This column looks back to the French Great Depression of 1930-1931, when savers had a safe alternative to banks in the form of government-backed savings institutions, and shows that the existence of safe deposits other than banks can play a substantial role in triggering bank runs. The study also provides insights into two elements of the current discussion: ceilings on safe deposits and interest rates.

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