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Virtual Money Illusion and the Fundamental Value of Non-Fiat Anonymous Digital Payment Methods

Greg W. Hunter () and Craig Kerr ()
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Greg W. Hunter: California State Polytechnic University
Craig Kerr: California State Polytechnic University

International Advances in Economic Research, 2019, vol. 25, issue 2, 151-164

Abstract: Abstract This paper discusses the determinants of a Non-Fiat Anonymous Digital Payment Method’s (N-FAD) value and illustrates a relationship between N-FAD transactions, economic growth, and inflation. The relationship raises a heretofore unmentioned issue concerning the ability of monetary authorities to operate effectively, which justifies regulatory concerns over bitcoin and other N-FADs. Our method of analysis allows for empirical estimates that characterize the magnitude of the concern, as it relates to the use of bitcoin. Finally, we are able to identify the stylized features of bitcoin that complicate monetary policy, comment on how they relate to the value of N-FADs more generally, and provide suggestions for future research.

Keywords: Crypto currency; Bitcoin; Quantity equation (search for similar items in EconPapers)
Date: 2019
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Handle: RePEc:kap:iaecre:v:25:y:2019:i:2:d:10.1007_s11294-019-09737-4