The Digital Euro and Deposit-Market Competition Portfolio Choice, Bank Switching, and Funding Adjustment

This research package studies the implications of a retail digital euro for bank deposit competition and funding. It develops a theoretical framework in which households choose between bank deposits and a capped, non-remunerated central bank digital currency, allowing for depositor heterogeneity, bank switching, and alternative bank funding. The analysis characterizes how digital-euro adoption can affect deposit rates, deposit allocation, and banks’ funding adjustment, and examines the role of design features such as holding limits. The repository contains the paper and associated research materials.