Figure 3
A diagram illustrating the interaction between commercial banking systems and central banking systems in the context of CBDC deposits. The diagram is divided into two main sections. On the left, the commercial banking system includes components such as bank deposits and bank managers. Bank managers raise the deposit rate above the CBDC deposit rate, motivating bank customers to keep their deposits in banks. This leads to greater bank lending from available deposits, an increase in deposit funding, and higher bank earnings. On the right, the central banking system includes CBDC deposits. The central bank increases the CBDC deposit rate, which motivates bank customers to move their deposits to CBDC deposits, resulting in a decrease in banking sector liquidity.Bank managerial discretion and real earnings management in a CBDC environment. Source: Author