Cryptocurrencies, Currency Competition, and the Impossible Trinity

Pierpaolo Benigno, Linda Schilling and Harald Uhlig ()

No 26214, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We analyze a two-country economy with complete markets, featuring two national currencies as well as a global (crypto)currency. If the global currency is used in both countries, the national nominal interest rates must be equal and the exchange rate between the national currencies is a risk-adjusted martingale. Deviation from interest rate equality implies the risk of approaching the zero lower bound or the abandonment of the national currency. We call this result Crypto-Enforced Monetary Policy Synchronization (CEMPS). If the global currency is backed by interest-bearing assets, additional and tight restrictions on monetary policy arise. Thus, the classic Impossible Trinity becomes even less reconcilable.

JEL-codes: D53 E4 F31 G12 (search for similar items in EconPapers)
Date: 2019-08
New Economics Papers: this item is included in nep-cba, nep-ifn, nep-mac, nep-mon, nep-opm and nep-pay
Note: AP IFM ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (26)

Published as Cryptocurrencies, Currency Competition, and the Impossible Trinity , Pierpaolo Benigno, Linda M. Schilling, Harald Uhlig. in NBER International Seminar on Macroeconomics 2021 , Galí and West. 2022
Published as Pierpaolo Benigno & Linda M. Schilling & Harald Uhlig, 2022. "Cryptocurrencies, Currency Competition, and the Impossible Trinity," Journal of International Economics, .

Downloads: (external link)
http://www.nber.org/papers/w26214.pdf (application/pdf)

Related works:
Journal Article: Cryptocurrencies, currency competition, and the impossible trinity (2022)
Working Paper: Cryptocurrencies, Currency Competition, and The Impossible Trinity (2022)
Chapter: Cryptocurrencies, Currency Competition, and the Impossible Trinity (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:26214

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w26214

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().