Crowding Out in a Dual Currency Regime? Digital versus Fiat Currency
45 Pages Posted: 4 May 2017
Date Written: April 24, 2017
In this paper, we analyse a dual currency regime with fiat currency and digital currency and investigate potential crowding-out effects of fiat currency or digital currency under the framework of the traditional monetary economic model. We find that crowding out only occurs under extreme assumptions, i.e. extremely high costs associated with the use (medium of exchange and store of value) of one currency and extremely low costs associated with the use of the other currency.
Keywords: Bitcoin, Digital currency, Dual currency, Crowding out
JEL Classification: E00, E41, E42
Suggested Citation: Suggested Citation