Money Mining and Price Dynamics
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Michael Choi
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Guillaume Rocheteau
- American Economic Journal: Macroeconomics (Forthcoming)
Abstract
We develop a random-matching model to study the price dynamics of monies produced privately
according to a time-consuming mining technology. For our leading example, there exists a unique equilibrium where the value of money increases over time and reaches a steady state. There is also a continuum of perfect-foresight equilibria where the price of money inflates and bursts gradually over time.
Initially, money is held for a speculative motive but it acquires a transactional role as it becomes sufficiently abundant. We study flat, commodity, and crypto monies, endogenous acceptability, and adopt
implementation and equilibrium approaches.
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