TIME CONSISTENCE AND STABLE DIGITAL CURRENCY IN GENERAL EQUILIBRIUM

Rodrigo Raad and Juan Pablo Gama
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Rodrigo Raad: Cedeplar/UFMG
Juan Pablo Gama: Cedeplar/UFMG

No 688, Textos para Discussão Cedeplar-UFMG from Cedeplar, Universidade Federal de Minas Gerais

Abstract: This paper develops a general equilibrium framework that extends the Ramsey-Friedman taxation model by explicitly incorporating heterogeneous agents, competitive markets, and a central planner responsible for fiscal policy and debt management. Within this unified structure, the model captures the interaction between decentralized market outcomes and centralized policy instruments, while the adoption of quasi-linear preferences guarantees that the planner’s allocations remain time-consistent. Building on these foundations, we introduce a virtual monetary unit that emerges endogenously in equilibrium as a transaction-clearing service. This contribution addresses the open question of how to characterize money within general equilibrium theory, advancing the discussion by proposing a digital system that preserves purchasing power across regions and productive sectors in a stable, non-inflationary manner, without generating distortions in resource allocation.

Keywords: General equilibrium; Stable Digital Currency; Ramsey-Friedman Taxation Model; Time Consistency (search for similar items in EconPapers)
JEL-codes: D41 D50 D51 D53 D62 E42 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2025-11
New Economics Papers: this item is included in nep-dge, nep-mon and nep-pay
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