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A Model To Think About Crypto-Assets and Central Bank Digital Currency

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  • Hernán D. Seoane

Abstract

This paper introduces digital assets, crypto assets in general, and Central Bank Dig- ital Currency in particular, into an otherwise standard New-Keynesian closed economy model with Financial Frictions. We use this setting to study the impact of a change in preferences towards the use of digital assets and to address whether the emergence of this type of instruments affect the transmission of monetary policy shocks. In this context we study the introduction of Central Bank Digital Currencies. The model is stylized but it could be a baseline for the design of models for quantitative analysis.

Suggested Citation

  • Hernán D. Seoane, 2021. "A Model To Think About Crypto-Assets and Central Bank Digital Currency," EconPol Policy Reports 33, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    • Handle: RePEc:ces:econpr:_33
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    File URL: https://www.ifo.de/DocDL/EconPol_PolicyReport33.pdf
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    References listed on IDEAS

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    1. Bernanke, Ben S. & Gertler, Mark & Gilchrist, Simon, 1999. "The financial accelerator in a quantitative business cycle framework," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 21, pages 1341-1393, Elsevier.
    2. Michael Choi & Guillaume Rocheteau, 2021. "Money Mining and Price Dynamics," American Economic Journal: Macroeconomics, American Economic Association, vol. 13(4), pages 246-294, October.
    3. Fernández-Villaverde, Jesús & Sanches, Daniel, 2019. "Can currency competition work?," Journal of Monetary Economics, Elsevier, vol. 106(C), pages 1-15.
    4. Schilling, Linda & Fernández-Villaverde, Jesús & Uhlig, Harald, 2024. "Central bank digital currency: When price and bank stability collide," Journal of Monetary Economics, Elsevier, vol. 145(C).
    5. Jesus Fernandez-Villaverde, 2021. "Cryptocurrencies and All That:Two Ideas from Monetary Economics," PIER Working Paper Archive 21-009, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    6. Davoodalhosseini, Seyed Mohammadreza, 2022. "Central bank digital currency and monetary policy," Journal of Economic Dynamics and Control, Elsevier, vol. 142(C).
    7. Kumhof, Michael & Noone, Clare, 2018. "Central bank digital currencies - design principles and balance sheet implications," Bank of England working papers 725, Bank of England.
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