More on Money Mining and Price Dynamics: Competing and Divisible Currencies

35 Pages Posted: 14 Jul 2020

See all articles by Michael Choi

Michael Choi

University of California, Irvine

Guillaume Rocheteau

Federal Reserve Bank of Cleveland; National University of Singapore (NUS)

Date Written: March 19, 2020

Abstract

We develop a random-matching model to study the price dynamics of divisible monies produced privately by using a time-consuming mining technology. There exists a unique equilibrium where the value of money increases until it reaches a steady state. There is also a continuum of perfect-foresight equilibria indexed by the starting value of the currency where the price of money inflates and bursts over time. Early on private money is held for a speculative motive and it acquires a transactional role when money supply becomes sufficiently abundant. We study gold- and crypto-mining technologies, fiat and commodity monies, single and competing currencies.

Keywords: Money, Search, Private and Competing Monies, Mining, Divisible

JEL Classification: E40, E50

Suggested Citation

Choi, Michael and Rocheteau, Guillaume, More on Money Mining and Price Dynamics: Competing and Divisible Currencies (March 19, 2020). Available at SSRN: https://ssrn.com/abstract=3632646 or http://dx.doi.org/10.2139/ssrn.3632646

Michael Choi (Contact Author)

University of California, Irvine ( email )

3151 Social Science Plaza
Irvine, CA 92697-5100
United States

Guillaume Rocheteau

Federal Reserve Bank of Cleveland ( email )

PO Box 6387
Cleveland, OH 44101-1387
United States

National University of Singapore (NUS) ( email )

1E Kent Ridge Road
NUHS Tower Block Level 7
Singapore, 119228
Singapore

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