Benigno, Pierpaolo; Schilling, Linda M.; Uhlig, Harald (2022). Cryptocurrencies, currency competition, and the impossible trinity. Journal of international economics, 136, p. 103601. Elsevier 10.1016/j.jinteco.2022.103601
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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. Deviation from interest rate equality implies the risk of approaching the zero lower bound or the abandonment of the national currency. We call this result Crypto-Enforced Monetary Policy Synchronization (CEMPS). 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: |
Journal Article (Original Article) |
|---|---|
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: |
0022-1996 |
Publisher: |
Elsevier |
Language: |
English |
Submitter: |
Julia Alexandra Schlosser |
Date Deposited: |
26 Oct 2022 06:48 |
Last Modified: |
05 Dec 2022 16:27 |
Publisher DOI: |
10.1016/j.jinteco.2022.103601 |
BORIS DOI: |
10.48350/174102 |
URI: |
https://boris.unibe.ch/id/eprint/174102 |
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