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Democratic (crypto-)currency issuance

Author

Listed:
  • Hans Gersbach

    (CER-ETH-Center of Economic, Research at ETH Zurich and CEPR)

Abstract

Can democratic currency issuance lead to welfare-optimal results/stable currency values? We explore (crypto-)currency issuance with flexible majority rules. With flexible majority rules, the vote-share needed to approve a particular currency issuance growth is increasing with this growth rate. By choosing suitable flexible majority rules, socially optimal growth rates can be achieved in simple settings. By adding a communication stage, in which agents can reveal their preferences for currency growth, the voting process can be ended in three rounds. With other procedures, one could even obtain the first-best solution in one voting round. Finally, we show that optimal money growth rates are realized if agents entering financial contracts anticipate ensuing inflation rates determined by these flexible majority rules.

Suggested Citation

  • Hans Gersbach, 2022. "Democratic (crypto-)currency issuance," Digital Finance, Springer, vol. 4(2), pages 169-185, September.
    • Handle: RePEc:spr:digfin:v:4:y:2022:i:2:d:10.1007_s42521-022-00051-z
    DOI: 10.1007/s42521-022-00051-z
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    References listed on IDEAS

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    1. Howard R. Bowen, 1943. "The Interpretation of Voting in the Allocation of Economic Resources," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 58(1), pages 27-48.
    2. Aleksander Berentsen & Fabian Schär, 2018. "The Case for Central Bank Electronic Money and the Non-case for Central Bank Cryptocurrencies," Review, Federal Reserve Bank of St. Louis, vol. 100(2), pages 97-106.
    3. Hans Gersbach & Volker Hahn, 2009. "Voting Transparency in a Monetary Union," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(5), pages 831-853, August.
    4. Bullard, James & Waller, Christopher J, 2004. "Central Bank Design in General Equilibrium," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(1), pages 95-113, February.
    5. Hall, Robert E, 1997. "Irving Fisher's Self-Stabilizing Money," American Economic Review, American Economic Association, vol. 87(2), pages 436-438, May.
    6. Gersbach, Hans, 2017. "Flexible Majority Rules in democracyville: A guided tour," Mathematical Social Sciences, Elsevier, vol. 85(C), pages 37-43.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Digital currency; Central bank; Voting; Majority rule; Flexible majority rules;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • 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
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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