CBDC Stress Test in a Dual-Currency Setting

ArXiv ID: 2511.13384 “View on arXiv”

Authors: Catalin Dumitrescu

Abstract

This study explores the potential impact of introducing a Central Bank Digital Currency (CBDC) on financial stability in an emerging dual-currency economy (Romania), where the domestic currency (RON) coexists with the euro. It develops an integrated analytical framework combining econometrics, machine learning, and behavioural modelling. CBDC adoption probabilities are estimated using XGBoost and logistic regression models trained on behavioural and macro-financial indicators rather than survey data. Liquidity stress simulations assess how banks would respond to deposit withdrawals resulting from CBDC adoption, while VAR, MSVAR, and SVAR models capture the macro-financial transmission of liquidity shocks into credit contraction and changes in monetary conditions. The findings indicate that CBDC uptake (co-circulating Digital RON and Digital EUR) would be moderate at issuance, amounting to around EUR 1 billion, primarily driven by digital readiness and trust in the central bank. The study concludes that a non-remunerated, capped CBDC, designed primarily as a means of payment rather than a store of value, can be introduced without compromising financial stability. In dual currency economies, differentiated holding limits for domestic and foreign digital currencies (e.g., Digital RON versus Digital Euro) are crucial to prevent uncontrolled euroisation and preserve monetary sovereignty. A prudent design with moderate caps, non remuneration, and macroprudential coordination can transform CBDC into a digital liquidity buffer and a complementary monetary policy instrument that enhances resilience and inclusion rather than destabilising the financial system.

Keywords: Central Bank Digital Currency (CBDC), Dual-currency economy, Liquidity stress simulations, XGBoost, Financial stability, Macro / Fiat Currency

Complexity vs Empirical Score

• Math Complexity: 8.0/10
• Empirical Rigor: 7.0/10
• Quadrant: Holy Grail
• Why: The paper employs advanced econometric and mathematical modeling including VAR, MSVAR, SVAR, and agent-based simulations, indicating high mathematical complexity. It is grounded in data-driven stress testing with calibrated parameters, behavioral modeling, and scenario analysis, showing substantial empirical rigor.

  flowchart TD
    A["Research Goal<br>Assess CBDC impact on financial stability<br>in an emerging dual-currency economy (Romania)"] --> B["Integrated Analytical Framework<br>Combining Econometrics, ML & Behavioural Modelling"]
    B --> C["Data & Inputs<br>Behavioural & Macro-financial Indicators"]
    C --> D["Computational Processes<br>CBDC Adoption Probabilities (XGBoost / Logistic Regression)<br>Liquidity Stress Simulations<br>Macro-Financial Transmission (VAR / MSVAR / SVAR)"]
    D --> E["Key Findings & Outcomes<br>Moderate CBDC uptake (EUR 1bn)<br>Driven by trust & digital readiness<br>Stable design: Non-remunerated, capped, payment-focused<br>Differentiated limits preserve monetary sovereignty"]