European Business Schools Librarian's Group
HEC Research Papers Series,
HEC Paris
No 1568: Do cryptocurrencies matter?
Bruno Biais, Jean Charles Rochet and Stéphane Villeneuve
Additional contact information
Bruno Biais: HEC Paris
Jean Charles Rochet: University of Geneva
Stéphane Villeneuve: University of Toulouse 1
Abstract: In our dynamic general equilibrium model, agents can invest in money and in a production technology exposed to shocks. If the government is non-benevolent and has a monopoly over money issuance it issues too much money, to finance excessive public expenditures. We study the effects of a cryptocurrency in limited supply but with crash risk. If the crash risk is not too large, competition from the cryptocurrency constrains the government's monetary policy. If the government is non-benevolent, this constraint improves citizens welfare, but if the government is rather benevolent competition from the cryptocurrency can lower citizens' welfare.
Keywords: Cryptocurrency; Hyperinflation; Dynamic General Equilibrium; Denationalisation of money
JEL-codes: E42
27 pages, May 18, 2025
Note: Funder Statement European Research Council: Grant 882375, WIDE, for Biais, Grant 101055239, DIPAMUTA, for Rochet)
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