Parallel Digital Currencies and Sticky Prices / Harald Uhlig, Taojun Xie.

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Uhlig, Harald

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w28300.Publication details: Cambridge, Mass. National Bureau of Economic Research 2020.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: The recent rise of digital currencies opens the door to their use in parallel alongside official currencies ("dollar'') for pricing and transactions. We construct a simple New Keynesian framework with parallel currencies as pricing units and sticky prices. Relative prices become a state variable. Exchange rate shocks can arise even without other sources of uncertainty. A one-time exchange rate appreciation for a parallel currency leads to persistent redistribution towards the dollar sector and dollar inflation. The share of the non-dollar sector increases when prices in the dollar sector become less sticky and when firms can choose the pricing currency.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w28300 (Browse shelf(Opens below))	Not For Loan

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December 2020.

The recent rise of digital currencies opens the door to their use in parallel alongside official currencies ("dollar'') for pricing and transactions. We construct a simple New Keynesian framework with parallel currencies as pricing units and sticky prices. Relative prices become a state variable. Exchange rate shocks can arise even without other sources of uncertainty. A one-time exchange rate appreciation for a parallel currency leads to persistent redistribution towards the dollar sector and dollar inflation. The share of the non-dollar sector increases when prices in the dollar sector become less sticky and when firms can choose the pricing currency.