Do cryptocurrencies matter?

Bruno Biais, Jean Rochet and Stéphane Villeneuve
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Bruno Biais: HEC Paris
Stéphane Villeneuve: University of Toulouse 1

No 1568, HEC Research Papers Series from HEC Paris

Abstract: In our dynamic general equilibrium model, agents can invest in money and in a production technology exposed to shocks. If the government is non-benevolent and has a monopoly over money issuance it issues too much money, to finance excessive public expenditures. We study the effects of a cryptocurrency in limited supply but with crash risk. If the crash risk is not too large, competition from the cryptocurrency constrains the government's monetary policy. If the government is non-benevolent, this constraint improves citizens welfare, but if the government is rather benevolent competition from the cryptocurrency can lower citizens' welfare.

Keywords: Cryptocurrency; Hyperinflation; Dynamic General Equilibrium; Denationalisation of money (search for similar items in EconPapers)
JEL-codes: E42 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2025-05-18
New Economics Papers: this item is included in nep-dge, nep-mon and nep-pay
Note: Funder Statement European Research Council: Grant 882375, WIDE, for Biais, Grant 101055239, DIPAMUTA, for Rochet)
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Related works:
Working Paper: Do cryptocurrencies matter? (2025)
Working Paper: Do cryptocurrencies matter? (2025)
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Persistent link: https://EconPapers.repec.org/RePEc:ebg:heccah:1568

DOI: 10.2139/ssrn.5259267

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