Job market paper

Anonymity, Secondary Demand, and the Velocity of Cryptocurrency

To fill in the gap of understanding how cryptocurrencies differ from existing electronic payment means from the consumers’ perspective and what these differences imply, this paper generalizes the canonical search-theoretic model to capture two previously overlooked features of cryptocurrencies: 1) anonymity-seeking individuals prefer cryptocurrencies for online payments; and 2) they purchase their cryptocurrencies secondhand to avoid revealing their identities. This generalization allows demand for cryptocurrencies to be governed by not only transaction motives but also by speculation, and is capable of explaining the observed negative correlation between Bitcoin velocity and opportunity cost, contrary to the positive correlation observed in conventional currencies. I conduct a counterfactual exercise to illustrate the impact of anonymity-motivated secondary demand on cryptocurrency price, and discuss the implications for monetary policy and national security risk. Besides the application in cryptocurrencies, my model is suitable for studying the informal economy in general.

Working papers

Believe It or Not: How Directed Technical Change and a Bit of Optimism Lead the Economy Towards Green Growth [with Sjak Smulders]

Directed technical change (DTC) may stimulate clean innovations and phase out polluting technologies, thus contributing to climate change policy. In the existing literature, market size and initial conditions determine whether the direction of technical change is clean or dirty, and path dependency arises. However, as the literature on coordination failures has pointed out in a different context, expectations play an important role in forward-looking decision makings. This paper shows how multiple equilibria easily arise in a standard workhorse model of DTC, when innovators are forward-looking. In our model there is a range of initial conditions from which both an equilibrium with clean innovation and an equilibrium with dirty innovation can emerge. With “optimistic” beliefs, the transition to clean technologies materializes, while with “pessimistic” beliefs, polluting technologies dominate in the long run. The range for which this multiplicity arises depends on the degree of substitutability of the final goods from the two sectors. Implications of the overlap for environmental policies are also investigated.

Closing the Loop in a Circular Economy: Saving Resources or Suffocating Innovations? [with Sjak Smulders and Reyer Gerlagh] (Early and incomplete draft. Available upon request.)

A linear economy disposes materials embodied in consumer goods. Re-use of materials in a circular economy alleviates resource scarcity, but there can be unanticipated effects on innovation and growth. We develop a two-sector endogenous growth model with Schumpeterian innovation. The primary sector is innovative: monopolists continuously develop new products and use primary resources in production. The secondary sector refurbishes retired products: it requires no primary resource for production, but also does not develop new products (and thus does not promote innovations). We find that increased refurbishing always results in less resource extraction and increases consumption in the short run, but comes at a cost of lower innovation in the transition. The overall welfare impact of higher refurbishing depends on how strong the resource-saving technology bias is. When technology is not sufficiently resource saving, increasing refurbishing always raises welfare; while welfare is hump-shaped in the refurbishing rate for large technology bias.

Work in progress

Currency Exchange in Competitive Search Equilibrium [with Benoit Julien and Randall Wright]
Asymmetric Information and Overinvestment of Fossil Fuel Assets

Published (pre-doctoral)

Cisneros E, Zhou SL, Börner J (2015) Naming and Shaming for Conservation: Evidence from the Brazilian Amazon. PLoS ONE 10(9): e0136402.