Substitution of traditional money with virtual currencies and its effects on macroeconomic variables in the form of DSGE model

Subject Areas : Computational economics

mohammad pouraghdam ¹ , taghi torabi ² , abbas memarnezhad ³ , teymor mohammadi ⁴

1 - دانشکده مدیریت و اقتصاد، دانشگاه آزاد اسلامی، واحد علوم و تحقیقات
2 - دانشکده مدیریت و اقتصاد، دانشگاه آزاد اسلامی، واحد علوم و تحقیقات
3 - دانشکده مدیریت و اقتصاد، دانشگاه آزاد اسلامی، واحد علوم و تحقیقات
4 - دانشکده اقتصاد دانشگاه علامه طباطبائی

Received: 2022-12-15 Accepted : 2023-04-26 Published : 2023-02-20

Keywords: Virtual money, , , , , cryptocurrency, , , , , traditional money, , , , , asset portfolio, , , , , dynamic stochastic general equilibrium (DSGE) model,

Abstract :

The growth of global interest in virtual money, which is an Internet innovation with a function similar to "backless" money or fiat money, due to the high speed and efficiency in payments (especially cross-border payments) and also the elimination of costs The additional operation received by the intermediary institutions raises the need for the attention of policymakers and global decision-making centers. The purpose of this article was to investigate the replacement of traditional money with virtual currencies and its effects on macroeconomic variables. In this study, a dynamic stochastic general equilibrium (DSGE) approach and statistical data of the period 1989-2021 were used, in which it is assumed that due to the use of virtual money, a substitution between virtual money and traditional money will occur in the asset portfolio of individuals. . In this study, the shock caused by the price and volume of Bitcoin transactions is considered as an indicator for the demand for virtual currency. The results obtained from this study indicate that the shock from virtual currencies has led to a decrease in the demand for traditional money, in other words, there has been a substitution between keeping traditional money and virtual money. In addition, the results indicated that due to the shock of virtual currencies, the amount of consumption in the economy has increased, and on the other hand, the amount of government income from royalties and money printing has decreased. Also, the results showed that the government's tax revenues have also decreased due to the trend of financial resources in the economy towards the demand of virtual currencies.