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Prof. Guillaume Rocheteau

The University of California, Irvine, USA

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Authors: Michael Choi and Guilllaume Rocheteau

Abstract: We develop a random-matching model to study the price dynamics of monies produced privately according to a time-consuming mining technology. There exists a unique equilibrium where the value of money reaches a steady state. There is also a continuum of perfect-foresight equilibria indexed by the starting value of the currency where the price of money inflates and bursts gradually over time. In the aftermath of its introduction, private money is held for a speculative motive and it acquires a transactional role when it becomes sufficiently abundant. We study divisible, indivisible, fiat and commodity monies, and adopt implementation and equilibrium approaches.
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Full Text:  “Money Mining and Price Dynamics”