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Digital money as a medium of exchange and monetary policy in open economies

Published online by Cambridge University Press:  10 December 2025

Daisuke Ikeda Open the ORCID record for Daisuke Ikeda [Opens in a new window]
Daisuke Ikeda*
Affiliation:
Bank of Japan, Tokyo, Japan
*
Email: daisuke.ikeda@boj.or.jp
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Abstract

The rise of digital money may bring about privately issued money that circulates across borders and coexists with public money. This paper uses an open-economy search model with multiple currencies to study the impact of such global money on monetary autonomy – the capacity of central banks to set a policy instrument. I show that the circulation of global money can entail a loss of monetary autonomy, but it can be preserved if government policy that limits the amount or use of global money for transactions is introduced or if the global currency is subject to the threat of counterfeiting. The result suggests that global digital money and monetary autonomy can be compatible.

Keywords

Cryptocurrencymonetary autonomycurrency counterfeitinggovernment transaction policyD82E4E5F31

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Macroeconomic Dynamics , Volume 29 , 2025 , e162
Copyright
© The Author(s), 2025. Published by Cambridge University Press

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