A model of monetary singleness

2026

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This paper develops an analytical framework to study the concept of monetary singleness in the face of rapid innovation in digital payments and new forms of privately issued digital money.

* Presents a three-period banking model where banks choose their debt's unit of account and medium of exchange status.
* Analyzes how small deviations from par can be consistent with efficient allocation, but large deviations or differing asset bases increase the risk of inefficient equilibria.
* Highlights the stabilizing roles of cash and central bank reserves in promoting monetary singleness and interoperability.

Tags: monetary policy, digital currency, banking, unit of account, financial stability

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