Experimenting with Digital Currency

Luis Araujo, Leo Ferraris, Marco Mantovani and Daniela Puzzello

No 557, Working Papers from University of Milano-Bicocca, Department of Economics

Abstract: Sovereign digital currencies are about to be launched in several countries. A key feature of this intangible counterpart of cash is its traceability. Using a microfounded monetary model, we show that traceability can be exploited to incentivize liquidity transfers among traders, thus stimulating production and trade. We empirically test the theoretical prediction through a controlled laboratory experiment. We find that sovereign digital currency stimulates production and trade, provided that the authorities actively help promote its acceptability.

Keywords: digital currency; cash; monetary policy; laboratory experiment (search for similar items in EconPapers)
JEL-codes: C90 E40 (search for similar items in EconPapers)
Pages: 47
Date: 2025-09
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Persistent link: https://EconPapers.repec.org/RePEc:mib:wpaper:557

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