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Bitcoin as a Currency: A Theoretical Framework of Bitcoin’s Supply Effect on Consumption and Inflation
This thesis examines the macroeconomic effects of Bitcoin's fixed money supply within a dynamic general equilibrium context. Traditional Keynesian economics proposes that central banks regulate the money supply through interest rate manipulation and monetary interventions to promote economic stabili...
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AUC Knowledge Fountain
2025
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| _version_ | 1867613425258987520 |
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| access_status_str | Open Access |
| author | Hassan, Begad Amr |
| author_browse | Hassan, Begad Amr |
| author_facet | Hassan, Begad Amr |
| author_sort | Hassan, Begad Amr |
| collection | Thesis |
| description | This thesis examines the macroeconomic effects of Bitcoin's fixed money supply within a dynamic general equilibrium context. Traditional Keynesian economics proposes that central banks regulate the money supply through interest rate manipulation and monetary interventions to promote economic stability within the market. However, cryptocurrencies, like Bitcoin, present a challenge due to their algorithmically predetermined supply, which halves every four years, removing discretionary monetary policy. By adapting Calvo's (1983) staggered-price model to a closed economy, supposing Bitcoin is the only medium of exchange, it is deduced that Bitcoin's deflationary nature causes a persistent consumption collapse and hyper deflationary spirals. Furthermore, calibrations reveal that the absence of monetary stabilization mechanisms at any price rigidity level leads to volatile demand shocks and economic instability. The findings align with Friedman's (1969) and Claeys et al.’s (2018) critiques. They underscore Bitcoin’s limitations as a viable currency and highlight the need for a hybrid mechanism to counteract its scarcity with macroeconomic stability. This research builds on the literature by formalizing the trade-offs inherent in decentralized monetary policies and providing quantitative evidence of Bitcoin’s destabilizing effects under New Keynesian economics. |
| format | Thesis |
| id | oai:fount.aucegypt.edu:etds-3577 |
| institution | American University in Cairo (Egypt) |
| last_indexed | 2026-06-10T12:35:56.457Z |
| license_str | Not specified — see source repository |
| provenance_str_mv | Harvested via OAI-PMH from AUC Knowledge Fountain — bepress |
| publishDate | 2025 |
| publishDateRange | 2025 |
| publishDateSort | 2025 |
| publisher | AUC Knowledge Fountain |
| publisherStr | AUC Knowledge Fountain |
| record_format | dspace |
| source_str | AUC Knowledge Fountain — bepress |
| spelling | oai:fount.aucegypt.edu:etds-3577 Bitcoin as a Currency: A Theoretical Framework of Bitcoin’s Supply Effect on Consumption and Inflation Hassan, Begad Amr This thesis examines the macroeconomic effects of Bitcoin's fixed money supply within a dynamic general equilibrium context. Traditional Keynesian economics proposes that central banks regulate the money supply through interest rate manipulation and monetary interventions to promote economic stability within the market. However, cryptocurrencies, like Bitcoin, present a challenge due to their algorithmically predetermined supply, which halves every four years, removing discretionary monetary policy. By adapting Calvo's (1983) staggered-price model to a closed economy, supposing Bitcoin is the only medium of exchange, it is deduced that Bitcoin's deflationary nature causes a persistent consumption collapse and hyper deflationary spirals. Furthermore, calibrations reveal that the absence of monetary stabilization mechanisms at any price rigidity level leads to volatile demand shocks and economic instability. The findings align with Friedman's (1969) and Claeys et al.’s (2018) critiques. They underscore Bitcoin’s limitations as a viable currency and highlight the need for a hybrid mechanism to counteract its scarcity with macroeconomic stability. This research builds on the literature by formalizing the trade-offs inherent in decentralized monetary policies and providing quantitative evidence of Bitcoin’s destabilizing effects under New Keynesian economics. 2025-06-18T07:00:00Z thesis application/pdf https://fount.aucegypt.edu/etds/2527 https://fount.aucegypt.edu/context/etds/article/3577/viewcontent/auto_convert.pdf Theses and Dissertations AUC Knowledge Fountain Bitcoin Fixed Money Supply DGE model Staggered-price model Money Supply Inflation Consumption Economics Economic Theory Macroeconomics |
| spellingShingle | Bitcoin Fixed Money Supply DGE model Staggered-price model Money Supply Inflation Consumption Economics Economic Theory Macroeconomics Hassan, Begad Amr Bitcoin as a Currency: A Theoretical Framework of Bitcoin’s Supply Effect on Consumption and Inflation |
| title | Bitcoin as a Currency: A Theoretical Framework of Bitcoin’s Supply Effect on Consumption and Inflation |
| title_full | Bitcoin as a Currency: A Theoretical Framework of Bitcoin’s Supply Effect on Consumption and Inflation |
| title_fullStr | Bitcoin as a Currency: A Theoretical Framework of Bitcoin’s Supply Effect on Consumption and Inflation |
| title_full_unstemmed | Bitcoin as a Currency: A Theoretical Framework of Bitcoin’s Supply Effect on Consumption and Inflation |
| title_short | Bitcoin as a Currency: A Theoretical Framework of Bitcoin’s Supply Effect on Consumption and Inflation |
| title_sort | bitcoin as a currency a theoretical framework of bitcoin s supply effect on consumption and inflation |
| topic | Bitcoin Fixed Money Supply DGE model Staggered-price model Money Supply Inflation Consumption Economics Economic Theory Macroeconomics |
| url | https://fount.aucegypt.edu/etds/2527 https://fount.aucegypt.edu/context/etds/article/3577/viewcontent/auto_convert.pdf |
| work_keys_str_mv | AT hassanbegadamr bitcoinasacurrencyatheoreticalframeworkofbitcoinssupplyeffectonconsumptionandinflation |