Optimal Algorithmic Monetary Policy

Luyao Zhang and Yulin Liu

Papers from arXiv.org

Abstract: Centralized monetary policy, leading to persistent inflation, is often inconsistent, untrustworthy, and unpredictable. Algorithmic stablecoins enabled by blockchain technology are promising in solving this problem. Algorithmic stablecoins utilize a monetary policy that is entirely rule-based. However, there is little understanding of how to optimize the rule. We propose a model that trade-off the price for supply stability. We further study the comparative statics by varying several design features. Finally, we discuss the empirical implications for designing stablecoins by the private sector and Central Bank Digital Currency (CBDC) by the public sector.

Date: 2021-04, Revised 2021-10
New Economics Papers: this item is included in nep-cba, nep-mon and nep-pay
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2104.07888

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