Monetary policy and central banks faced significant challenges in recent decades, like the Great Recession and the 2008-2009 financial crisis, and the Global Inflation Surge of 2021-2022. The introduction of blockchain technology triggered major financial innovations. Nevertheless, the adoption...

This case study of the Illinois banking market shows how the private market managed the crisis in the banknote market during the first year of the Civil War. Banknotes backed by southern bonds started their decline with the election of Lincoln causing their values to fall below par. The Illinois...

Can competing stablecoins produce efficient and stable outcomes? We study competition among stablecoins pegged to a stable currency. They are backed by interest-bearing safe assets and can be redeemed with the issuer or traded in a secondary market. If an issuer sticks to an appropriate...

This paper explores the genesis of the German monetary framework between 1866 and 1876, with a specific focus on the 1875 Banking Act. The Banking Act constituted the final piece within the legislation that established Germany's post- unification monetary order, regulated bank note issuance...

Private money creation lies at the heart of currency competition due to seigniorage rents that are an important contributor to banks' franchise values. However, it undermines the role of central bank in money provision and has been historically a contentious issue. As shifting from private to...

This article presents a game-theoretic model analyzing the strategic competition between hard and fiat money, involving a representative player and a consolidated bank (including the central bank). The findings reveal counterintuitive interactions between inflation, interest rates, and monetary...

The rise of cryptocurrencies over the past decade has promised to challenge the dominance of fiat money systems and reshape monetary policy. However, recent developments, including market volatility and the collapse of key exchanges like FTX, have eroded public trust, raising skepticism of a...

This paper explores the genesis of the German monetary framework between 1866 and 1876, with a specific focus on the 1875 Banking Act. The Banking Act constituted the final piece within the legislation that established Germany's post- unification monetary order, regulated bank note issuance...

Geopolitical frictions and high levels of uncertainty in US policy are driving countries to reduce dependence on the US dollar and implement new policies to promote their own currencies for settling cross-border trade. This Weekly Report analyzes the reactions of firms to such measures, focusing...

Can competing stablecoins produce efficient and stable outcomes? We study competition among stablecoins pegged to a stable currency. They are backed by interest-bearing safe assets and can be redeemed with the issuer or traded in a secondary market. If an issuer sticks to an appropriate...

The Great Depression is the canonical case of a widespread currency war, with more than 70 countries devaluing their currencies relative to gold between 1929 and 1936. What were the currency war’s effects on trade flows? We use newly-compiled, highfrequency bilateral trade data and gravity...

This article explores the dynamics of international currency competition and de-dollarization, focusing on the current dominance of the US dollar and potential challenges from the Chinese renminbi and BRICS countries. It reviews recent literature on currency statecraft, the political economy of...

The Federal Reserve is commonly depicted as an institution set up by domestic actors to fulfill domestic functions that only later took on international and geopolitical dimensions. Yet we have long had an abundant literature on the financial projection of US power (“Dollar Diplomacy”) in...

This study investigated the extent of currency competition within the cryptocurrency market through the Hayek's concept of the denationalization of money, Hayek's original analysis primarily centered on competition revolving around the medium of the exchange function, This study posited that...

We use a theoretical model to set up the conditions for a country to attain monetary stability by allowing for two freely tradable currencies to circulate in parallel. For this parallel system to function properly, confidence in the good behavior of the monetary authorities in charge of the two...

This case study of the Illinois banking market shows how the private market managed the crisis in the banknote market during the first year of the Civil War. Banknotes backed by southern bonds started their decline with the election of Lincoln causing their values to fall below par. The Illinois...

This article re-examines Illinois free banking from a new perspective: ownership structure. The claim that ownership influenced banking activity and noteholder losses is analyzed, and it is shown that ownership did not have a major impact on asset allocation and losses. Only Chicago residents...

The relationship between private and public money has shaped the economic and legal debate over money for centuries. Private money can either compete with or complement public money and this depends on the applicable law and the relative powers of the State and private parties. The rise of...

We investigate monopolistic tendencies and the intensity of currency competition on the crypto market in the light of Hayek’s "Denationalization of money". Interestingly, Hayek never considered differentiation and specialization by innovative private currencies could lead lasting currency...

Technology is reshaping money and payment systems in unprecedented ways. Catalysts include the launch of Bitcoin in 2009, the evolution of both decentralised and centralised technologies, the announcement of Libra in 2019, live trials of China’s Digital Yuan, and COVID-19, both in 2020.This...

How do cryptocurrency exchanges compete with each other? We show that small and large crypto exchanges appear to be complements, rather than substitutes, as traditional oligopoly theory would predict. When large exchanges list new tokens, trade volumes on small exchanges increase, and small...

China watchers have decried the emergence of the Cross-Border Interbank Payment System (“CIPS”) as a turning point in the move to dethrone the U.S. dollar. This Article situates CIPS, which clears and settles Chinese renminbi transactions, with other financial market infrastructures, drawing...

This article explores cryptocurrencies and poses the research question, whether cryptocurrencies are the future of the currency market. The cryptocurrency market has undergone considerable growth, however given recent scandals of cryptocurrency markets and cryptocurrencies have led to increasing...

We analyse the drivers of Bitcoin transactions against 44 fiat currencies in the largest peer-to-peer crypto exchanges. Momentum and volatility in the cryptoasset market, as well as volatility and liquidity in global financial markets do matter for Bitcoin trading. There is suggestive evidence...

The coexistence of fiat money (cash) and digital monies constitutes a system of parallel currencies as media of exchange. This paper asks whether a new (digital) currency is essential: Does a new currency allow for a better resource allocation even if a fully accepted currency is in circulation...

The free-banking history of Switzerland is commonly subdivided into a period with unfettered competition (1826 - 1881) and strong banknote regulation (1881 - 1907). This paper suggests that unrestricted competition between private note-issuing banks gave rise to a fragmented paper-money system,...

The coexistence of cash and digital currencies constitutes a system of parallel currencies. This paper tackles the question whether a new (digital) currency is essential: Does a new currency allow for a better resource allocation even if a fully accepted currency is in circulation and still...

The free-banking history of Switzerland is subdivided into periods with unfettered competition (1826–1881), and strict banknote regulation (1881–1907). This paper suggests that the Federal Banknote Act of 1881 was introduced to remedy the fragmentation of the unfettered-competition period,...

In the two-country model in Benigno, Schilling & Uhlig (2022), the usage of a privately-issued crypto-asset as a global means of payment leads to the enforced synchronization of nominal interest rates, and hence to a loss of monetary policy autonomy. This paper shows that the same result obtains...

In the second half of the 19th century, the Chilean free banking system worked similarly to how Adam Smith describes the 18th century free banking system in Scotland. The characteristics of free banking that Smith identifies as conductive of successful outcomes—free entry, unlimited liability,...

In the early 1870s, the global monetary system transitioned from bimetallism—a regime in which gold and silver currencies were tied at quasi-fixed exhange ratios—to the gold standard that was characterized by the use of (only) gold as the main currency metal by the largest and most advanced...

Despite the distinctive character of the Austrian approach to "microfoundations for macroeconomics", the literature on free banking contains a number of arguments which make use of game-theoretic concepts and models such as the well-known Prisoner's Dilemma model. While there can be no general a...

The author of this article draws special attention to two particular claims of the free bankers concerning the supposed working characteristics of a fractional-reserve free banking system which may strike the reader as questionable. The first of these relates to the alleged absence of a...

In the early 1870s, the global monetary system transitioned from bimetallism-a regime in which gold and silver currencies were tied at quasi-fixed exhange ratios-to the gold standard that was characterized by the use of (only) gold as the main currency metal by the largest and most advanced...

For one variable-supply currency in isolation, one player's Cobb-Douglas utility depends on the current supply divided by the initial supply, multiplied by the inverse of the accumulative inflation/deflation. With equal weight assigned to both factors, money printing outweighs inflation, and...

Virtual currencies are a contemporary form of private money. Thanks to their technological properties, their global transaction networks are relatively safe, transparent, and fast. This gives them good prospects for further development. However, they remain unlikely to challenge the dominant...