Papers by Mirewuti Muhetaer
Social Science Research Network, 2022
Social Science Research Network, 2022
Social Science Research Network, 2022
The distributed ledger technology, which can eliminate the third party in a transaction, has been... more The distributed ledger technology, which can eliminate the third party in a transaction, has been developing rapidly in recent years, especially in the private cryptocurrency sector, with strong implications for monetary policy and payment system. This paper examines the potential welfare effect of currency substitution between fiat currency and private cryptocurrency when both can be used as a medium of exchange. A dynamic general equilibrium model is developed, which captures novel features of a currently operating private cryptocurrency payment processor and uses the relevant data of bitcoin. The findings indicate that a private cryptocurrency with high rate of return and low stable exchange rate not only can compete with legal fiat currency but also has the potential of crowding it out. This significantly impacts the effectiveness of monetary policy. Changes in price have a small positive effect on consumer’s welfare while the effect of the exchange rate is significant and mixed...
SSRN Electronic Journal, 2022
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Papers by Mirewuti Muhetaer