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1、Team Control Problem FFor office use For office use erdisciplinary ing (ICM) Summary (Attach a copy of this page to each copy of your solution ANewEraofWorldFinance:TheStrategyForAGlobal Decentralized Digital Finanl Market Team Control Problem FFor office use For office use erdisciplinary ing (ICM)

2、Summary (Attach a copy of this page to each copy of your solution ANewEraofWorldFinance:TheStrategyForAGlobal Decentralized Digital Finanl Market Background . . . . . Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1111Ourwork . . . . . . . . . . .

3、. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 12 2 Our 2A Team#Page2of WewontaskeverycountrytoWewontaskeverycountrytoyabandonthetraditionalcurrencyandsubstitutecurrencyforDigitalcurrencyisonlyedbythecentral.3M1: l System ConstructionDSGE In this r, we consider establishin

4、g a globally dispersed digital l market. We do requireeveryheworldtoeaunifiedcurrency,nordowerequiretheetoabandon the physical currency and replace it widigital currency. Team#Page2of WewontaskeverycountrytoWewontaskeverycountrytoyabandonthetraditionalcurrencyandsubstitutecurrencyforDigitalcurrencyi

5、sonlyedbythecentral.3M1: l System ConstructionDSGE In this r, we consider establishing a globally dispersed digital l market. We do requireeveryheworldtoeaunifiedcurrency,nordowerequiretheetoabandon the physical currency and replace it widigital currency. What we hope to establish is a l system in w

6、hich digital currency is ied by the central b. Of course, it is also atmosteconomiesarediscussingatthepresentstage.Whatsmore, weonlyconsiderthemostgeneraltis,digitalcurrencyisonlyedbythecentralMhissectionisbasedonthedesignedbyBarrdearandKumhof(2016)2andQian(2018) 3. Using the Dynamic Stochastic Gene

7、ral Equilibrium (DSGE), it sible whether the roduction of digital currency by the central b is feasib y exploring the impact of the roductionoflegaldigitalcurrencyonthecountrysmacroeconomiceffects.SinceQianY(2018)3 a mes t the central b s digital currencycomple y repla physical cash, t is, the count

8、ry DSGE b s and the central b . On the basis of considering different situations-the country comple y abandoning the original currency, not comple y abandoning the original currency and not i ing digital currency, combined with economic reality, we yze whether the central b s i ance of digitalcurren

9、cyisfeasiblefordifferentcountriesandfortheimpactofthemacroeconomyoncountries.A Digitalcurrencyandmaterialcurrencyaspaymentinstrumentsc assets with the sameerest rates.Sticky nominal price and sticky nominal wage. Consumerspendinghabitswillnotchangeforawhile.sobeusedFromofsandcustomers,allitsareatis,

10、forindividuals,consumptionitiveeffects,andbringsnegativeThere are two levels of vendors, the final vendor and ermediate vendor. manufacturer is in a se of monopolistic competition, and the final manufacturer is in a seof complete competition.ermediatevendorsrely entirely on external financing its)fo

11、r capitalinvestment hiring workers. The adjustment of the investment strategy of theermediatemanufacturerrequires a corresponding cost.The it reserve is equal to erest rate of the central s digital currency. itreserverateistherisk-free10.There is lcanbeusedtofinancethepublicorborrowfromthecentral11.

12、 lsdonot12. lofcommerlbs. The berest rate is lowern the commerlbconveniencerate.13. MonetarysTeam#Page3of Nominal commodity price Actual consumption of the Balance of bits held by the family The size of the central bsdigitalcurrency held by the family held by the familyNominalwage Demand elasticity

13、coefficient of full factors production Elastic coefficient of capital he levelof scienceand Impact of Firmowned capital FirminvestmentCommer l bloan Commer l bloan to central bitit reserve Bit eresttCentral digital Team#Page3of Nominal commodity price Actual consumption of the Balance of bits held b

14、y the family The size of the central bsdigitalcurrency held by the family held by the familyNominalwage Demand elasticity coefficient of full factors production Elastic coefficient of capital he levelof scienceand Impact of Firmowned capital FirminvestmentCommer l bloan Commer l bloan to central bit

15、it reserve Bit eresttCentral digital erest ratetcentral realerestFirm profitActualbitbalanceheldbythefami- Thesizeoftheactualcentralb rency held by the familyThesizeof theactualcentralcurrencyheldbythe arsCentral loan erestThe cost of commer l bhepro sof conducting loan businessCommer l B Capitaldep

16、re tionCommer l B ity Smoothing IndexFamily holding currency smoothing index Commer l BCredit Risk Premium S- moothingIndextMaterialcurrency Negative utility of measurement work Measuringthenegativeutilityofusingb Proportion of itsheld by the Commer l Credit Risk Premium moothing Proportion of house

17、hold holding currency The impact of the central b ervaldiscount ermediateproductFinal Inflation adjustment Commer l b alguarantee)Commer lcredit risk (removalof tutional Firm capital adjustment cost factorPhase 0 commer l bcreditrisk(within- stitutionalguarantee)z Phase0commer lb systemguarantee)cre

18、ditriskMofall,combinedwiththeactualsituation,wetthefamilysnominal tt + t + t + t= tt + t1 D + t1 t1 + t1 t1 + oanactualbudgettis,dividebothsidesby Turnt +t+t +t =tt+t1 D +t1 t1+t1 t1 tmethecurrentutilityfunctionoftheAtthesametime,we =log d( t2Among them, item representsthe utility of actual consumpt

19、ion toconsumers. The measures the negative utility of the work, and the larger the value, the higher the negative The third item describes the negative effects of changes in actual b de its on households. Since households use b de its to receive some restrictions and need to pay a certain cost, the

20、greater the fluctuation of b de its, the greater the negative effect on the family. its,duceasecondtt t =1vt =vvt1 +(1v)(+(11+Here, t indicatestheproportionofhouseholdsholding money,vt indicatestheproportionofhouse- twhent itive,anincreaseint willincreasetheamountofdigitalmoneyheldbyandreducethesize

21、ofTeam#Page4of izetheutilityofthefamilybasedon(2)andmax j representslaydiscountfactorforutility,anditsvalueisn0and1. Theequationissolvedtoobtain-ordercondition,whichwillnotbeexplainedtoomuchFirm According to the New Keynes DSGE framework, it is t there are two firms, final firm and ermediatefirm, an

22、d the final firms are in complete competition. They ermediate product tTeam#Page4of izetheutilityofthefamilybasedon(2)andmax j representslaydiscountfactorforutility,anditsvalueisn0and1. Theequationissolvedtoobtain-ordercondition,whichwillnotbeexplainedtoomuchFirm According to the New Keynes DSGE fra

23、mework, it is t there are two firms, final firm and ermediatefirm, and the final firms are in complete competition. They ermediate product t() from ermediatefirms toproducethefinalproductt. is t 0 Tosolve () ()tt() Amongthem,thetotalpriceindexisdefined t t()10 Atermediatefirmsproductionfunctionssati

24、sfytheCobb-Douglasproductiontion,theyt()= Amongthem, t representstotalfactorproductivity,whichisdeterminedbythe technologicallevelof the overall economy:t t =( t =t +Here 0 t the level of technology continues to increase over time. t represents thecorresponding tion rate is defined as , ermediate fi

25、rms can accumulate capital investing 1=(+(1Isbeentfirmsrelyentirelyonloansforcapitalinvestmentandpayingwages,sothere t() ()+ Therefore, the corresponding firm pays (), where is the erest rate during LLttperiod. In addition, price adjustment and capital adjustment require firms to pay a certacost. Th

26、e price adjustment cost and capital adjustment cost are defined as follows: 2 ) ) 2 P ( t()2 kt) t()t12 tL t() P ( t( ) k(t( Thegoalofermediatefirmisizetheexpecteddiscountedvalueofeachperiodofwhichcanbeexpressedt+j,t+j1 max Similarly,t()andt()canbesolvedusingtheLagrangianequationtoobta of (19), whic

27、h is also not explained in detail here.nhet-order Team#Page5of l l s have two financing channels, which can be financed its of t or loans to the central for t. When the funds are raised, the bcan choose to it the he form of a it reserve at the central t, and canalso lendthefundstothecompany t. There

28、fore, forthel ingsector,there t + t = t + tTurnoanactualvariable,andthenitisexpressed + t Team#Page5of l l s have two financing channels, which can be financed its of t or loans to the central for t. When the funds are raised, the bcan choose to it the he form of a it reserve at the central t, and c

29、analso lendthefundstothecompany t. Therefore, forthel ingsector,there t + t = t + tTurnoanactualvariable,andthenitisexpressed + t = t + tForls,theactualprofitt1 1 t1 Tt1 tlt t tAmongthem, indicatestheitreserveratio,and erestratetothe erestratecorridor.lt representsthecostalhesofconductingaloanbusine

30、ss. dt representstheeasuresthel s Credit creation ability. t reflects the risk management of commerl bs. The higher the value of it, the lower the risk management ability of commer s will be. Referring to Qian Y (2018) 3, we at t ibject to: t = (1 w) + wt1 + Becausetheitreserveandthecentralsdigitalc

31、urrencyarebothcentralmetthetwoareequal, tis,therisk-freerateplus C = tAccordingtoerestratepricingmethodoflcreditriskpremiumofls,there t +Dt = t +1t +Lt1t =(1r1)10 +r11t1 +2t =(1r2)20 +r22t1 + lsineacht+j,t+j1 max CentralForthecentral,itneedstoainequilibriumofits t + t + t = tThe central ed digital c

32、urrency to create a price-based monetary policy tool for the . tmonetarysinflation,thesettingof t +(t 1) 1 t =(1+RtGeneral Fquilibrium Under the optimal constrasoftheabovefourdepartments,t librium condition is met,t is, the total output is equal to the total supply:eralt =t +t + P ( t ( )+ k(t( )+lt

33、 t)Team#Page6of ionandThis can be d tovarious economies. Countries can determine each parameter ing to its economic development s us and national comprehensive development level, obtain con- stra s under steady-s e conditions, and compare with the current situation he countryto deter- mine whetherit

34、 is feasible to i edigitalcurrency.Butforthesake of simplicity here,weconsiderthe current situation of all countries as much as sible and reasonably determine the parameters. The current LIBOR (US) December erest rate is approxima y 3%, and the erest rate is used as theerioddiscountfactor iscalibrat

35、edto0.971.Theproportionerestrate,Team#Page6of ionandThis can be d tovarious economies. Countries can determine each parameter ing to its economic development s us and national comprehensive development level, obtain con- stra s under steady-s e conditions, and compare with the current situation he c

36、ountryto deter- mine whetherit is feasible to i edigitalcurrency.Butforthesake of simplicity here,weconsiderthe current situation of all countries as much as sible and reasonably determine the parameters. The current LIBOR (US) December erest rate is approxima y 3%, and the erest rate is used as the

37、erioddiscountfactor iscalibratedto0.971.Theproportionerestrate,andtotalwagestoGDP heworldvarieswidelybet ndevelopedanddevelo countries.European and American countries canrea ore n 50%. African countries are generally below 20%. In some countries,suchasChina,thisvalue issignificantly lower.Considerth

38、e globalsituation,set to0.7.Set10 and 20 to 04% and 2%, depending on the difference bet n the one-year b de it rate, the one-year b loan rate, and the de it reserve. The calibration of oth arameters is shown he tab elow.Table2:ParameterCalibrationTableof1 1544 According to the parameter values set a

39、bove, calculatethe correspondingde it reserve ratio and the proportion of household consumption to GDP under steady s e conditions. When = 1, t is, the digital currency comple y repla the existing physical currency, the steady s e values of this indicator are 78,75%, respectively. See Table 3 for de

40、tails.Table3:TheHouseholdconsumptionasashareof = = = Inrecentyears,somemajoreconomieshaveloweredorcancelledthebut some countries, suchas China, ma aina high s utoryde it reserve ratio. At present, most of the ernational reserves ma ain a de it reserve ratio of around 15%. According to data released

41、by theWorldB , theproportionoffinalconsumption inGDPworldwidein2017wasapproxima y 80%. This p r a mes tforeign currencyde itsand importsand exportsare notconsidered. If thisfactorisconsidered,thesteady-s eindicatorsshouldbeappropria yadjusteddownward.Over- all, the parametrically calibrated m can we

42、ll match the characteristics of current world economic finance. Itc sobeseenfromTable3 twhen = 1,them ismostconsistentwiththesituation,thisstage,whenthepublicholdsallofthecurrencyasadigitalitismoreconducivetoeconomicTherefore,basedonthis,wettheestablishment ofacentraltoeacurrencylsystemisfeasiblefor

43、theernationaleconomicFutureheabove,wetthetechnicalimpactofthecentraliis heentireysis,wesetittoitivenumber. Nowwesetittoannumber. Referring to the economic setting of Qian Y (2018) 3, we set the standard central bdigitalcurrencyt to 0.0006 and set to 1. The chart belowshowsthe i overall macro economy

44、.deviationof th pactoft on Team#Page7of Figure2: TheimpactofthetechnicalshockofcentraldigitalcurrencyonconsumptionandFigure 2 t whenitivedigitalcurrencyshockoccurs, itwillcontributetotheof household consumption and the increase of economic outputhe long run, which furtht the mis feasible.Weletthecal

45、ibrationvalueofeachparameterfluctuatewithin10% oftheoriginalcalibrationone by one. It turns outtthisdoesnotaffectthe is robust.s we have drawn,so we tTeam#Page7of Figure2: TheimpactofthetechnicalshockofcentraldigitalcurrencyonconsumptionandFigure 2 t whenitivedigitalcurrencyshockoccurs, itwillcontri

46、butetotheof household consumption and the increase of economic outputhe long run, which furtht the mis feasible.Weletthecalibrationvalueofeachparameterfluctuatewithin10% oftheoriginalcalibrationone by one. It turns outtthisdoesnotaffectthe is robust.s we have drawn,so we tKey Factors: Principal ysis

47、 Sinceb , which will have great significance for the countrys economic grow nd economic stability, in this section, we yze the factors t influence the finan l system at the individual, national and world levels.finan l system, and used principalcomponent ysis (PCA)to screenout keyvariables. Finally,

48、 11 ofthemaregrouped ofourcategories,whichrepresentthekeyfactorsofac s,growth,stabilityand security of the finan l system.PCA simplifies the coincidence variables and synthesizes them with only a few key factors. It can findseverallinearcombinationscontaining themaininformation, whereisnocoincidence

49、bet nthe information of each linear combination. So we have the principal below: 1 = 2 = m =11 1 +12 2 + +1p = 21 1 +22 2 + +2p =m1 1+m2 2 + p =1 i j are = 12Based on this e, we select countries population of n 20 he world countrieswitotal GDP of moren 100 billion US dollars according toernationalpr

50、actice.These countries areo eight grades according tothe per capita GDPof eachcountry in 2017. grade randomly extracts 14 economic indicators of the mber of countries, and obtains a alrandom vector = ( 1 14). CA calculation, following the ofselected principalcomponents oftheeigenvalues 1and thecumul

51、ative contributionrateof wegetalinearlycombinedsetoflinearcombinations tarele umerousanduncorrelatedbet n vectors: 1, 2, 3, 4. They are the , second, third, and fourth priciple components of the original variable metrics 1, 2, 14.sfactors:inflationItcanbeseenfromthecoefficientoftheprincipalt consist

52、sofinflationernmentcorruptionindexernmentcreditrating. Oneofreasonsfortheemergenceofdigitalcurrencyt siveuseofmoneyledtosiveinflation.Theeofbitcoinistosolvetheproblemofyfore, the size of the inflation rate can affect the s factor. ernment sworkefTeam#Page8of Table4:Standarddeviation,variancecontribu

53、tionrate,andcumulativecontributionratecorrespondingtothe four principal components of the normalized variableStandard deviation Table5:Theeigenvectorcorrespondingto4principalcomponentsofthenormalized Team#Page8of Table4:Standarddeviation,variancecontributionrate,andcumulativecontributionratecorrespo

54、ndingtothe four principal components of the normalized variableStandard deviation Table5:Theeigenvectorcorrespondingto4principalcomponentsofthenormalized erestRatioofbroadmoneytototalreserves Broad money(% of GDP)Inflation rate Exchange rate also thedigital currency s factor, oernmentcorruptionindex

55、 ernment credit rating. The more corrupt ernment is, the more it resists the currencyit will be out of ernment regulation or because of bureaucracy leading to high reg- ulatorycosts. Whats more, if the ernmen s high credit, the credit base is relatively strong and can support the i ance of credit cu

56、rrency. ItcanbeseenfromtheprincipalcomponentcoefficientsofTabletthesecondprincipalponent consists of broad money rcentage of GDP), gross domestic product, and The broad money, M2 (quasi-currency), reflects the direct purchasing er and potential pur- chasing er of society, which can be used to measur

57、e the growth trend of future digital cur- rencies. Gross domestic product is the premise and basis for future growth. Combined with the budget level, it can measure the future growth momentum. Itcan beseen fromthecoefficientofthe principaltthethird principalconsists of population and unemployment ra

58、te. The stability of population growth or is the basic foundation for the stability of digital currency i ance and frequency of its use. In general, the unemployment rate is an important factor easuring the stability of a countrys economic system. Therefore, it is a key factor a aining the stability

59、 of this new finan l Securityfactors:ratioofbroadmoneytototalreserves,exchangeItcanbeseenfromthecoefficientoftheprincipaltthefourthprincipalconsists of the ratio of the broad money to the total reserve and the exchange rate. The ratio broadmoneytototalreservesreflectsthelevelofacountryssavingsrate.S

60、avingsarethesecurity of peoples lives inacountrywhenproblemsoccur he operation ofthe economicsystem,thus affectingthesecurityofthefinan lsystem.Fluctuations inexchangeratescanleadtoinsecurityhefinan lsystemandhaveanimpactonthesecurityofthefinan lhisxplorethekeytinfluencetheionofthelsystem. We divide