Do cryptocurrencies matter?

Bruno Biais, Jean Rochet and Stéphane Villeneuve

No 25-1643, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: In our dynamic general equilibrium model, agents can invest in money and in a production technology exposed to shocks. If the government is non-benevolent and has a monopoly over money issuance it issues too much money, to finance excessive public expenditures. We study the effects of a cryptocurrency in limited supply but with crash risk. If the crash risk is not too large, competition from the cryptocurrency constrains the government’s monetary policy. If the government is non-benevolent, this constraint improves citizens welfare, but if the government is rather benevolent competition from the cryptocurrency can lower citizens’ welfare.

Date: 2025-05-22
New Economics Papers: this item is included in nep-dge, nep-fdg, nep-mon and nep-pay
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Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:130554

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