EconPapers    
Economics at your fingertips  
 

Parallel Digital Currencies and Sticky Prices

Harald Uhlig () and Taojun Xie ()
Additional contact information
Harald Uhlig: University of Chicago - Department of Economics; CEPR; NBER
Taojun Xie: National University of Singapore - Lee Kuan Yew School of Public Policy, Asia Competitiveness Institute

No 2020-188, Working Papers from Becker Friedman Institute for Research In Economics

Abstract: The recent rise of digital currencies opens the door to their use in parallel alongside official currencies (“dollar†) for pricing and transactions. We construct a simple New Keynesian framework with parallel currencies as pricing units and sticky prices. Relative prices become a state variable. Exchange rate shocks can arise even without other sources of uncertainty. A one-time exchange rate appreciation for a parallel currency leads to persistent redistribution towards the dollar sector and dollar inflation. The share of the non-dollar sector increases when prices in the dollar sector become less sticky and when firms can choose the pricing currency.

Keywords: Private money; cryptocurrency; digital currency; currency choice; monetary policy (search for similar items in EconPapers)
JEL-codes: E30 E52 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2020
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon, nep-pay and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://repec.bfi.uchicago.edu/RePEc/pdfs/BFI_WP_2020188.pdf (application/pdf)

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: https://EconPapers.repec.org/RePEc:bfi:wpaper:2020-188

Access Statistics for this paper

More papers in Working Papers from Becker Friedman Institute for Research In Economics Contact information at EDIRC.
Bibliographic data for series maintained by Toni Shears ().

 
Page updated 2021-10-13
Handle: RePEc:bfi:wpaper:2020-188