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Money Mining and Price Dynamics

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  • Michael Choi
  • Guillaume Rocheteau

Abstract

We develop a random-matching model to study the price dynamics of monies produced privately according to a time-consuming mining technology. For our leading example, there exists a unique equilibrium where the value of money increases over time and reaches a steady state. There is also a continuum of perfect-foresight equilibria where the price of money inflates and bursts gradually over time. Initially, money is held for a speculative motive, but it acquires a transactional role as it becomes sufficiently abundant. We study fiat, commodity, and crypto monies, endogenous acceptability, and adopt implementation and equilibrium approaches.

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  • Michael Choi & Guillaume Rocheteau, 2021. "Money Mining and Price Dynamics," American Economic Journal: Macroeconomics, American Economic Association, vol. 13(4), pages 246-294, October.
    • Handle: RePEc:aea:aejmac:v:13:y:2021:i:4:p:246-94
    DOI: 10.1257/mac.20200034
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    Cited by:

    1. Bruno Biais & Christophe Bisière & Matthieu Bouvard & Catherine Casamatta & Albert J. Menkveld, 2023. "Equilibrium Bitcoin Pricing," Journal of Finance, American Finance Association, vol. 78(2), pages 967-1014, April.
    2. Asongu, Simplice A. & Ngoungou, Yolande E. & Nnanna, Joseph, 2023. "Mobile money innovations and health performance in sub-Saharan Africa," Technology in Society, Elsevier, vol. 74(C).
    3. Simplice A. Asongu & Peter Agyemang-Mintah & Joseph Nnanna & Yolande E. Ngoungou, 2024. "Mobile money innovations, income inequality and gender inclusion in sub-Saharan Africa," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 10(1), pages 1-21, December.
    4. Hernán D. Seoane, 2021. "A Model To Think About Crypto-Assets and Central Bank Digital Currency," EconPol Policy Reports 33, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    5. Schilling, Linda & Fernandez-Villaverde, Jesus & Uhlig, Harald, 2020. "Central Bank Digital Currency: When price and bank stability collide," MPRA Paper 113248, University Library of Munich, Germany, revised 01 May 2022.
    6. Radwanski, Juliusz, 2021. "The Equilibrium Value of Bitcoin," MPRA Paper 110746, University Library of Munich, Germany.
    7. Kee-Youn Kang, 2023. "Cryptocurrency and double spending history: transactions with zero confirmation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 75(2), pages 453-491, February.
    8. Asongu, Simplice A. & le Roux, Sara, 2023. "The role of mobile money innovations in transforming unemployed women to self-employed women in sub-Saharan Africa," Technological Forecasting and Social Change, Elsevier, vol. 191(C).
    9. Jonathan Chiu & Thorsten V. Koeppl, 2017. "The Economics Of Cryptocurrencies - Bitcoin And Beyond," Working Paper 1389, Economics Department, Queen's University.
    10. Julián A. Parra & Carlos Arango - Joaquín Bernal & José E. Gómez - Javier Gómez & Carlos León - Clara Machado & Daniel Osorio - Daniel Rojas & Nicolás Suárez - Eduardo Yanquen, 2019. "Criptoactivos: análisis y revisión de literatura," Revista ESPE - Ensayos Sobre Política Económica, Banco de la República, issue 92, pages 1-37, November.
    11. Simplice A. Asongu & Nicholas M. Odhiambo, 2023. "Female unemployment, mobile money innovations and doing business by females," Journal of Innovation and Entrepreneurship, Springer, vol. 12(1), pages 1-26, December.
    12. Chiu, Jonathan & Wong, Tsz-Nga, 2022. "Payments on digital platforms: Resiliency, interoperability and welfare," Journal of Economic Dynamics and Control, Elsevier, vol. 142(C).
    13. Jesús Fernández-Villaverde & Daniel R. Sanches, 2024. "Price-Level Determination Under the Gold Standard," Working Papers 24-06, Federal Reserve Bank of Philadelphia.
    14. Kee‐Youn Kang & Seungduck Lee, 2024. "Money, Bitcoin, and Monetary Policy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 56(1), pages 225-256, February.

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    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-
    • N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913
    • N24 - Economic History - - Financial Markets and Institutions - - - Europe: 1913-

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