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Title: Cryptocurrencies and monetary policy Authors:  Marco Lorusso - Northumbria University (United Kingdom) [presenting]
Francesco Ravazzolo - Free University of Bozen-Bolzano (Italy)
Abstract: A Dynamic Stochastic General Equilibrium (DSGE) model is developed to evaluate the economic repercussions of cryptocurrencies. We assume that the representative household maximizes its utility given by consumption, leisure and both government currency and cryptocurrency holdings. The model includes entrepreneurs that determine the supply of cryptocurrency in the economy. We also consider a central bank setting the nominal interest rate following a general augmented Taylor-type interest-rate rule. In particular, the nominal rate responds not only to the interest rate in the previous period and to deviations of output and inflation from their steady-state values, but also to nominal money growth in government currency and cryptocurrency. We calibrate our model using US data. Our impulse response analysis shows the effects of a ``traditional'' shock to household's demand for real balances of government currency as well as to a ``new'' shock to household's demand for real balances of cryptocurrency. Moreover, we evaluate the response of main macroeconomic fundamentals to productivity shocks for production of cryptocurrency. Finally, we quantify the importance of the shocks demand/supply shocks of cryptocurrecny through a variance decomposition analysis.