Theoretical question: if there were a digital currency, lets call it NGDP coin, that adjusted its supply to target NGDP, how do you imagine it happening or what is the ideal mechanism? Lets take for granted that it is not a national currency and not intended to target the NGDP of a geographical region. The good news is that the ledger makes it incredibly easy to calculate NGDP because you know both the size and quantity of transactions. But if the currency becomes more widely adopted, would it warrant a shrinking of the supply of currency? Financial transactions would be included in the calculus, is that problematic? This would be more like Fishers version than Friedmans. The other potential problem is what is the reaction function? Over what time period should it average the transactions and make adjustments? If volume cuts in half in one day, it would seem odd to double the currency.
Posted on: Sun, 13 Jul 2014 17:38:20 +0000