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Privacy and Money: It Matters

Author

Listed:
  • Emanuele Borgonovo
  • Stefano Caselli
  • Alessandra Cillo
  • Donato Masciandaro
  • Giovanni Rabitti

Abstract

In the economic literature, a medium of payment has two properties: liquidity and store of value. The fast and increasing development of digital currencies raises the question: is privacy a third attribute? We test these assertions through a laboratory experiment. From the theoretical viewpoint, the experiment relies on the simultaneous combination of Keynes’s traditional demand for money and Friedman’s forward looking intuition on the role of privacy. Results show that privacy positively matters and increases the overall appeal of a medium of payment, even more for risk prone individuals. Given privacy, the sacrifice ratio between liquidity risk and opportunity cost is relatively high. Within the current debate, the experiment suggests that the future competition between alternative currencies will depend on how the three properties will be mixed in a way consistent with the individual’s preferences.

Suggested Citation

  • Emanuele Borgonovo & Stefano Caselli & Alessandra Cillo & Donato Masciandaro & Giovanni Rabitti, 2019. "Privacy and Money: It Matters," BAFFI CAREFIN Working Papers 19108, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
  • Handle: RePEc:baf:cbafwp:cbafwp19108
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    References listed on IDEAS

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    1. Schilling, Linda & Uhlig, Harald, 2019. "Some simple bitcoin economics," Journal of Monetary Economics, Elsevier, vol. 106(C), pages 16-26.
    2. Ben Fung & Hanna Halaburda, 2016. "Central Bank Digital Currencies: A Framework for Assessing Why and How," Discussion Papers 16-22, Bank of Canada.
    3. Max Raskin & David Yermack, 2016. "Digital Currencies, Decentralized Ledgers, and the Future of Central Banking," NBER Working Papers 22238, National Bureau of Economic Research, Inc.
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    Cited by:

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    3. Ma, Qingguo & He, Yijin & Tan, Yulin & Cheng, Lu & Wang, Manlin, 2024. "Unveiling the Impact of Payment Methods on Consumer Behavior: Insights and Future Directions," OSF Preprints 3fphk_v1, Center for Open Science.
    4. Francesca Mariani & Maria Cristina Recchioni & Tai-Ho Wang & Roberto Giacalone, 2024. "Can market volumes reveal traders' rationality and a new risk premium?," Papers 2406.05854, arXiv.org.

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    More about this item

    Keywords

    Money Demand; Cryptocurrencies; Central Bank Digital Currencies; Behavioural Economics;
    All these keywords.

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