Monetary Policy in a World of Cryptocurrencies

Pierpaolo Benigno

No 13517, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Can currency competition affect central banks' control of interest rates and prices? Yes, it can. In a two-currency world with competing cash (material or digital), the growth rate of the cryptocurrency sets an upper bound on the nominal interest rate and the attainable inflation rate, if the government currency is to retain its role as medium of exchange. In any case, the government has full control of the inflation rate. With an interest-bearing digital currency, equilibria in which government currency loses medium-of-exchange property are ruled out. This benefit comes at the cost of relinquishing control over the inflation rate.

Date: 2022-04
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-pay
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Related works:
Journal Article: Monetary Policy in a World of Cryptocurrencies (2023)
Working Paper: Monetary Policy in a World of Cryptocurrencies (2022)
Working Paper: Monetary Policy in a World of Cryptocurrencies (2019)
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