Crowding Out in a Dual Currency Regime? Digital versus Fiat Currency

45 Pages Posted: 4 May 2017

See all articles by KiHoon Jimmy Hong

KiHoon Jimmy Hong

Hongik University

Kyounghoon Park

The Bank of Korea

Jongmin Yu

Hongik University - Department of Economics

Date Written: April 24, 2017

Abstract

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

Hong, KiHoon Jimmy and Park, Kyounghoon and Yu, Jongmin, Crowding Out in a Dual Currency Regime? Digital versus Fiat Currency (April 24, 2017). Bank of Korea WP 2017-13. Available at SSRN: https://ssrn.com/abstract=2962770 or http://dx.doi.org/10.2139/ssrn.2962770

KiHoon Jimmy Hong (Contact Author)

Hongik University ( email )

Mapogu
94
Seoul, Seoul 121
Korea, Republic of (South Korea)

Kyounghoon Park

The Bank of Korea ( email )

39, Namdaemun-ro, Jung-gu
Seoul, 04531
Korea, Republic of (South Korea)

Jongmin Yu

Hongik University - Department of Economics ( email )

Seoul
Korea, Republic of (South Korea)

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