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...

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...

The rise of digital currencies may result in domestic parallel currencies. Their exchange rate shocks will present a new challenge for monetary policy. We analyze these issues in a New Keynesian framework, where firms can set prices in one of the available currencies. Price rigidity translates a...

After remaining close to 1 US Dollar since its inception in November 2020, the algorithmic stablecoin UST crashed in the two weeks of May 9th to May 15th, 2022, leading to a price collapse of the underlying LUNA token and the erasure of more than 50 Billion U.S. Dollar or 90% in market value

I discuss private and central-bank-issued digital currencies, summarizing my prior research. I argue that prices of private digital currencies such as bitcoin follow random walks or, more generally, risk-adjusted martingales. For central bank digital currencies, I argue that they enhance the...

We analyze a two-country economy with complete markets, featuring two national currencies as well as a global (crypto)currency. If the global currency is used in both countries, the national nominal interest rates must be equal and the exchange rate between the national currencies is a...