Working Paper: NBER ID: w22238
Authors: Max Raskin; David Yermack
Abstract: Central banking in an age of digital currencies is a fast-developing topic in monetary economics. Algorithmic digital currencies such as bitcoin appear to be viable competitors to central bank fiat currency, and their presence in the marketplace may pressure central banks to pursue tighter monetary policy. More interestingly, the blockchain technology behind digital currencies has the potential to improve central banks’ payment and clearing operations, and possibly to serve as a platform from which central banks might launch their own digital currencies. A sovereign digital currency could have profound implications for the banking system, narrowing the relationship between citizens and central banks and removing the need for the public to keep deposits in fractional reserve commercial banks. Debates over the wisdom of these policies have led to a revival of interest in classical monetary economics.
Keywords: digital currencies; central banking; blockchain technology
JEL Codes: E42; E51; E52; E58; G21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| algorithmic digital currencies (E42) | central banks pursue tighter monetary policy (E52) |
| algorithmic digital currencies (E42) | public reliance on traditional banking systems (G21) |
| blockchain technology (E42) | central banks' payment and clearing operations (E58) |
| blockchain technology (E42) | central banks launching their own digital currencies (E42) |
| blockchain technology (E42) | dynamics of monetary policy and banking system (E59) |