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Payment Flows, Bank Lending, and Central Bank Digital Currencies

Yuteng Cheng & RYUICHIRO IZUMI

Journal of Money, Credit and Banking2026https://doi.org/10.1111/jmcb.70035article
AJG 4ABDC A*
Weight
0.50

Abstract

This paper examines the optimal observability of Central Bank Digital Currency (CBDC) payment flows in the context of bank lending. Observability matters because lenders use borrowers' payment flows to enforce repayment, and the degree of visibility varies across payment instruments. When a CBDC is introduced alongside existing payment methods, we show that moderate observability in CBDC transactions may generate a pooling equilibrium that involves inefficient credit allocation. The optimal level of observability depends on how much CBDC increases entrepreneurs' revenues: When the benefit is modest, the socially optimal design is deposit‐like; when the benefit is large, it is cash‐like.

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https://doi.org/https://doi.org/10.1111/jmcb.70035

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@article{yuteng2026,
  title        = {{Payment Flows, Bank Lending, and Central Bank Digital Currencies}},
  author       = {Yuteng Cheng & RYUICHIRO IZUMI},
  journal      = {Journal of Money, Credit and Banking},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.1111/jmcb.70035},
}

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Payment Flows, Bank Lending, and Central Bank Digital Currencies

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.