 Currency stability using blockchain technologyBryan Routledge and Ariel Zetlin-Jones Journal of Economic Dynamics and Control, 2022, vol. 142, issue C Abstract: To date, cryptocurrency prices are volatile and many cryptocurrency developers have adopted ad hoc approaches to stabilize their cryptocurrency price. When these currencies are not 100% backed by other valued assets, part of their price volatility may arise from self-fulfilling expectations of a speculative attack (as in Obstfeld (1996)). We show that an exchange rate policy, which is less than 100% backed and dynamically adjusts in response to traders’ conversion demand eliminates speculative attacks while, under some conditions, preserving much of the desired exchange rate stability. This dynamic exchange rate policy admits a great deal of discretion to and requires commitment by the party implementing the policy. We demonstrate how to implement this policy using the Ethereum network—a smart contract blockchain environment—and how this implementation yields commitment to the policy. Keywords: Blockchain; Cryptocurrency; Currency stability; Ethereum; Exchange rates; Fintech; Smart-contract; Speculative attacks; Stable-coin (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:142:y:2022:i:c:s0165188921000907 DOI: 10.1016/j.jedc.2021.104155 Access Statistics for this article Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok More articles in Journal of Economic Dynamics and Control from Elsevier |
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