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Do cryptocurrencies matter?

Author

Listed:
  • Biais, Bruno
  • Rochet, Jean-Charles
  • Villeneuve, Stéphane

Abstract

In our dynamic general equilibrium model, agents can invest in money and in a production technology exposed to shocks. If the government is non-benevolent and has a monopoly over money issuance it issues too much money, to finance excessive public expenditures. We study the effects of a cryptocurrency in limited supply but with crash risk. If the crash risk is not too large, competition from the cryptocurrency constrains the government’s monetary policy. If the government is non-benevolent, this constraint improves citizens welfare, but if the government is rather benevolent competition from the cryptocurrency can lower citizens’ welfare.

Suggested Citation

  • Biais, Bruno & Rochet, Jean-Charles & Villeneuve, Stéphane, 2025. "Do cryptocurrencies matter?," TSE Working Papers 25-1643, Toulouse School of Economics (TSE).
    • Handle: RePEc:tse:wpaper:130554
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    References listed on IDEAS

    as
    1. Ricardo Lagos & Randall Wright, 2005. "A Unified Framework for Monetary Theory and Policy Analysis," Journal of Political Economy, University of Chicago Press, vol. 113(3), pages 463-484, June.
    2. Rocheteau, Guillaume & Wang, Lu, 2023. "Endogenous liquidity and volatility," Journal of Economic Theory, Elsevier, vol. 210(C).
    3. Kiyotaki, Nobuhiro & Wright, Randall, 1993. "A Search-Theoretic Approach to Monetary Economics," American Economic Review, American Economic Association, vol. 83(1), pages 63-77, March.
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    More about this item

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System

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