Economics at your fingertips  

Cryptocurrencies and Cagan’s model of hyperinflation

Urban Jermann ()

Journal of Macroeconomics, 2021, vol. 69, issue C

Abstract: The drivers of the prices of Bitcoin and Ethereum are studied within a framework based on Cagan’s model of hyperinflation. In the model, the prices of the cryptocurrencies are driven by stochastic adoption and velocity shocks as well as endogenous expectations of future prices. The model is estimated with data for prices, transaction volumes, and money supplies. A majority of price fluctuations in both currencies can be attributed to shocks in adoption, velocity shocks are much less important. The money demand sensitivity to expected price changes is estimated to be larger for Bitcoin than for Ethereum, and both have higher sensitivity than fiat currencies during episodes of hyperinflation.

Keywords: Bitcoin; Ethereum; Money demand; Exchange rates (search for similar items in EconPapers)
JEL-codes: E31 E41 F31 G12 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
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:

DOI: 10.1016/j.jmacro.2021.103340

Access Statistics for this article

Journal of Macroeconomics is currently edited by Douglas McMillin and Theodore Palivos

More articles in Journal of Macroeconomics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

Page updated 2022-08-08
Handle: RePEc:eee:jmacro:v:69:y:2021:i:c:s0164070421000446