Cryptocurrency: Enforced Monetary Policy

[grarpamp]

https://www.sciencedirect.com/science/article/pii/S0022199622000332

“We analyze a two-country economy with complete markets, featuring two
national currencies as well as a global (crypto)currency. If the
global currency is used in both countries, the national nominal
interest rates must be equal and the exchange rate between the
national currencies is a risk-adjusted martingale. Deviation from
interest rate equality implies the risk of approaching the zero lower
bound or the abandonment of the national currency. We call this result
Crypto-Enforced Monetary Policy Synchronization (CEMPS). If the global
currency is backed by interest-bearing assets, additional and tight
restrictions on monetary policy arise. Thus, the classic Impossible
Trinity becomes even less reconcilable.”