General Digital Currency Circulation Model

摘要

We describe the influence of digital currency on the currency circulation of sovereign countries, the governments' behaviors, and the world trade system from three aspects: individual transactions, national regulation, and world trade. To describe clearly the behavior of individuals and countries from micro to macro perspectives, we divide the analytical framework into three submodels: Search and Matching Model, Long-Term Government Behavior Model, and Supranational Monetary System Model. First, we use Fisher's equation and Keynes's theory of currency demand to analyze the pricing and risk characteristics of digital currency. The theory shows that the volatility of digital currency originates from speculative demand that is too maneuverable, while the transactional demand is insufficient because too few individuals trust digital currency. Therefore, expanding transactional demand and acceptance will help stabilize the currency value and enable it to act better as a trading medium. Then we extend the Diamond-Mortensen-Pissarides Model (DMP) and established a Search and Matching Model for holding digital and fiat currencies in the market. We prove that there exists an equilibrium in the absence of external non-economic factors, that is, the proportion of people accepting digital to fiat currency will converge to a fixed range. But there is also a long-term situation in which some factors gradually expel the use of either fiat or digital currency. We refer to the actual economic situation of more than 130 major countries in the world, substitute relevant parameter estimates, evaluate the possible currency-holding patterns of these countries without policy intervention, and conclude that the more-developed and open economies will accept the coexistence of two currencies. The instability of currency value and other factors may cause a state to abandon fiat currency. We set up a Long-Term Government Behavior Model to measure the government's regulatory behavior. The government regulates the proportion of currency use through the difference of taxation between the two payment modes, resulting in a cost difference for different currency users. On the one hand, the high liquidity of digital currency will promote the emergence of transactions, while at the same time it will increase the matching efficiency in transactions, which will motivate the government to promote the use of it to increase the total tax base. On the other hand, due to the additional regulatory costs for digital currency and the possible social losses caused by illegal transactions, the government also needs to regulate the development of digital currency to some extent. Then we use the Profit Margin Model under Exchange Rate Fluctuation to conclude that under the hypothesis of relatively low volatility (that is, according to the theory of currency demand, the increase of demand for digital currency transactions will increase its stability), digital currency transactions will become the mainstream of international trade. We establish a Supranational Monetary System Model, in which digital currency is controlled by a supranational group and distributed to countries according to foreign exchange demand. When the world circulates it publicly, digital currency will achieve lower price volatility. At that point, world trade will be settled mainly by digital currency. However, due to differences in development, fiat currencies will still be retained and independent monetary policies will be formulated among countries. Central banks of all countries have the tendency to control the balance of trade and capital flow; they will help countries formulate sound and positive economic development programs, promote the free flow of capital, and tap the most potential growth point of economic investment. Finally, we discuss the impact of digital currency on the banking industry and the mechanism of long-term restructuring. The high liquidity and informatization of digital currency will lead to an oligopoly tendency of the banking industry and disappearance of the intermediary function of bank payments. Lending platforms similar to the banking industry will arise on the Internet. How to strengthen the supervision of illegal fund-raising and black-market transactions is a challenge for governments of all countries.