The Implications of the Incursion of Cryptocurrency on the Effectiveness of Fiscal Policy

Osiebuni Collins Obu, Wilfred I. Ukpere

Research output: Contribution to journalArticlepeer-review

3 Citations (Scopus)

Abstract

Existing literature has examined a plethora of factors that can affect the effectiveness, performance, or nature of fiscal policy in an economy. In this paper, we build on the fundamental tenets of micro-economic models to examine the potential ways cryptocurrencies can affect the effectiveness of a country’s fiscal policy. Our finding is that under the assumptions of an absence of uncertainties, perfectly competitive markets, household utility maximization, and usage of public money and cryptocurrency, the government purchases as well as the ability of the government to raise funds by issuing bonds and by taxation is decreasing in new investments in cryptocurrencies but increasing in the income earned from cryptocurrencies. We go further to discuss the factors that account for the sustained ability of cryptocurrencies to weaken the state’s fiscal-policy capabilities and possible ways the effects of cryptocurrencies on the state’s fiscal integrity can be mitigated.

Original languageEnglish
Pages (from-to)134-150
Number of pages17
JournalReview of Applied Socio-Economic Research
Volume23
Issue number1
DOIs
Publication statusPublished - 30 Jun 2022

Keywords

  • Cryptocurrency
  • Effectiveness
  • Fiscal Policy
  • Micro-economic models
  • Technology

ASJC Scopus subject areas

  • Business and International Management
  • Social Sciences (miscellaneous)
  • Economics and Econometrics
  • Marketing
  • Management of Technology and Innovation

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