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Central Bank Digital Cash and Cryptocurrencies: Insights from a New Baumol–Friedman Demand for Money

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  • Donato Masciandaro

Abstract

This article analyses ongoing changes in the supply of alternative media of payments (MOPs). The comparison between old (cash and deposits) and new (cryptocurrencies and central bank digital currencies) MOPs is based on a novel definition of money where a MOP has three properties: the first two are the standard functions of medium of exchange (liquidity costs) and store of value (opportunity costs) and the third is the novel function of store of information (privacy costs). Given such properties and that the evolution of the different MOPs likely depends on individual preferences, the relevance of experimental economics is highlighted.

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  • Donato Masciandaro, 2018. "Central Bank Digital Cash and Cryptocurrencies: Insights from a New Baumol–Friedman Demand for Money," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 51(4), pages 540-550, December.
    • Handle: RePEc:bla:ausecr:v:51:y:2018:i:4:p:540-550
    DOI: 10.1111/1467-8462.12304
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    2. Ayadi, Ahmed & Ghabri, Yosra & Guesmi, Khaled, 2023. "Directional predictability from central bank digital currency to cryptocurrencies and stablecoins," Research in International Business and Finance, Elsevier, vol. 65(C).
    3. Samuel Enajero, 2021. "Cryptocurrency, Money Demand and the Mundell-Fleming Model of International Capital Mobility," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 49(1), pages 57-69, March.
    4. Agur, Itai & Ari, Anil & Dell’Ariccia, Giovanni, 2022. "Designing central bank digital currencies," Journal of Monetary Economics, Elsevier, vol. 125(C), pages 62-79.
    5. Guizhou Wang & Kjell Hausken, 2022. "The evolution of fixed-supply and variable-supply currencies," Palgrave Communications, Palgrave Macmillan, vol. 9(1), pages 1-12, December.
    6. Wang, Yizhi & Lucey, Brian M. & Vigne, Samuel A. & Yarovaya, Larisa, 2022. "The Effects of Central Bank Digital Currencies News on Financial Markets," Technological Forecasting and Social Change, Elsevier, vol. 180(C).
    7. Guizhou Wang & Kjell Hausken, 2022. "Competition between Variable–Supply and Fixed–Supply Currencies," Economies, MDPI, vol. 10(11), pages 1-20, October.
    8. Xin, Baogui & Jiang, Kai, 2023. "Central bank digital currency and the effectiveness of negative interest rate policy: A DSGE analysis," Research in International Business and Finance, Elsevier, vol. 64(C).
    9. Dunbar, Kwamie, 2023. "CBDC uncertainty: Financial market implications," International Review of Financial Analysis, Elsevier, vol. 87(C).

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