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Designing a global digital currency

Author

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  • Balvers, Ronald J.
  • McDonald, Bill

Abstract

The notion of a global currency is a debate set aside in the past decade as the abstraction saw little potential for realization in a world with heterogeneous governments unwilling to sacrifice seigniorage for optimal design. The technical capability of creating digital currencies, independent of governments, resurrects the discussion and begs the questions of practical design and implementation. Given that price stability is a key feature of currency design, we consider theoretically the issue of pegging a continuously traded digital currency to a periodic measure of inflation. Empirically we identify factors a cryptocurrency might use to create a portfolio mimicking the ideal design.

Suggested Citation

  • Balvers, Ronald J. & McDonald, Bill, 2021. "Designing a global digital currency," Journal of International Money and Finance, Elsevier, vol. 111(C).
    • Handle: RePEc:eee:jimfin:v:111:y:2021:i:c:s0261560620302734
    DOI: 10.1016/j.jimonfin.2020.102317
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    References listed on IDEAS

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    Cited by:

    1. Wang, Yizhi & Wei, Yu & Lucey, Brian M. & Su, Yang, 2023. "Return spillover analysis across central bank digital currency attention and cryptocurrency markets," Research in International Business and Finance, Elsevier, vol. 64(C).
    2. Conlon, Thomas & Corbet, Shaen & McGee, Richard J., 2021. "Inflation and cryptocurrencies revisited: A time-scale analysis," Economics Letters, Elsevier, vol. 206(C).
    3. Allen, Franklin & Gu, Xian & Jagtiani, Julapa, 2022. "Fintech, Cryptocurrencies, and CBDC: Financial Structural Transformation in China," Journal of International Money and Finance, Elsevier, vol. 124(C).

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    More about this item

    Keywords

    Global currencies; Digital currencies; Cryptocurrencies; Currency design; Bitcoin;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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