Benigno, Pierpaolo; Uhlig, Harald; Schilling, Linda M. (August 2019). Cryptocurrencies, Currency Competition, and The Impossible Trinity (Discussion Paper 13943). CEPR - Centre for Economic Policy research
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We analyze a two-country economy with complete markets, featuring two national currencies as well as a global (crypto)currency. If the global currency is used in both countries, the national nominal interest rates must be equal and the exchange rate between the national currencies is a risk- adjusted martingale. We call this result Crypto-Enforced Monetary Policy Synchronization (CEMPS). Deviating from interest equality risks approaching the zero lower bound or the abandonment of the national currency. If the global currency is backed by interest-bearing assets, additional and tight restrictions on monetary policy arise. Thus, the classic Impossible Trinity becomes even less reconcilable.
Item Type: |
Working Paper |
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Division/Institute: |
03 Faculty of Business, Economics and Social Sciences > Department of Economics |
UniBE Contributor: |
Benigno, Pierpaolo |
Subjects: |
300 Social sciences, sociology & anthropology > 330 Economics |
ISSN: |
0265-8003 |
Series: |
Discussion Paper |
Publisher: |
CEPR - Centre for Economic Policy research |
Language: |
English |
Submitter: |
Dino Collalti |
Date Deposited: |
15 Apr 2020 10:50 |
Last Modified: |
05 Dec 2022 15:37 |
JEL Classification: |
E4, F31, D53, G12 |
BORIS DOI: |
10.7892/boris.142194 |
URI: |
https://boris.unibe.ch/id/eprint/142194 |
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