Two-Tier vs. Direct CBDC in Turkey: A DSGE Assessment of Banking Intermediation and Monetary Transmission

Year 2025, Volume: 75 Issue: 2, 549 - 578, 15.01.2026

Aytuğ Zekeriya Bolcan

https://doi.org/10.26650/ISTJECON2025-1788041

https://izlik.org/JA24SS65JZ

Abstract

This paper compares two retail central bank digital currency (CBDC) architectures—Two-Tier (bank-intermediated) and Direct (retail)—within a small-open-economy New Keynesian DSGE calibrated to Turkey. The model features monopolistic competition in deposits, a CES liquidity aggregator over bank deposits and CBDC, bank loan–deposit spreads, and a Taylor-rule policy rate. We trace impulse responses to four shocks: a banking (intermediation) shock, a liquidity-preference shock, a monetary policy shock, and a productivity shock. Three results emerge. First, the Two-Tier design preserves intermediation: deposit competition improves pass-through but does not trigger destabilizing outflows; loans and output fall modestly in adverse shocks, with limited disinflation. Second, the Direct design amplifies disintermediation under stress: deposit flight to CBDC is faster and larger, spreads widen, bank loans contract more, the output gap is more negative, and disinflation is stronger. These patterns are most pronounced for banking and liquidity shocks (Figures 1–2), present but milder for policy tightening (Figure 3), and small for positive productivity shocks where both designs yield rising real wages and subdued inflation (Figure 4). Overall, our Turkey-calibrated results support a “do-no-harm” Two-Tier CBDC: it delivers better deposit-rate pass-through and payment convenience while maintaining the traditional credit channel and smooth policy transmission, whereas a Direct CBDC would require tight safeguards (caps/tiered rates) to avoid credit crunch dynamics under stress.

Keywords

Central Bank Digital Currency (CBDC) , Two-Tier vs Direct architecture , Bank intermediation and credit channel , Monetary transmission (DSGE) , Financial stability and deposit–CBDC substitution

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