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Experimenting with Digital Currency

Author

Listed:
  • Luis Araujo
  • Leo Ferraris
  • Marco Mantovani
  • Daniela Puzzello

Abstract

Sovereign digital currencies are about to be launched in several countries. A key feature of this intangible counterpart of cash is its traceability. Using a microfounded monetary model, we show that traceability can be exploited to incentivize liquidity transfers among traders, thus stimulating production and trade. We empirically test the theoretical prediction through a controlled laboratory experiment. We find that sovereign digital currency stimulates production and trade, provided that the authorities actively help promote its acceptability.

Suggested Citation

  • Luis Araujo & Leo Ferraris & Marco Mantovani & Daniela Puzzello, 2025. "Experimenting with Digital Currency," Working Papers 557, University of Milano-Bicocca, Department of Economics.
    • Handle: RePEc:mib:wpaper:557
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    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General

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