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Does monetary policy fuel bitcoin demand? Event-study evidence from emerging markets

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  • Marmora, Paul

Abstract

Despite mounting central bank concerns over cryptocurrency adoption, there is little evidence that monetary policy compels national currency holders to consider decentralized virtual alternatives. Exploiting cross-country variation in prescheduled announcement timing, I isolate how monetary policy announcements affect local Bitcoin demand using an event-study design on a panel of 26 emerging economies. I find that monetary policy announcements increase both measures of local Bitcoin attention and local Bitcoin trade volume, but only on days when the public is abnormally attentive to inflation. These announcement-induced Bitcoin trading spikes are only significant in countries that are not normally accustomed to inflation risk.

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  • Marmora, Paul, 2022. "Does monetary policy fuel bitcoin demand? Event-study evidence from emerging markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 77(C).
    • Handle: RePEc:eee:intfin:v:77:y:2022:i:c:s1042443121001931
    DOI: 10.1016/j.intfin.2021.101489
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    3. Cheng, Jiyang & Tiwari, Sunil & Khaled, Djebbouri & Mahendru, Mandeep & Shahzad, Umer, 2024. "Forecasting Bitcoin prices using artificial intelligence: Combination of ML, SARIMA, and Facebook Prophet models," Technological Forecasting and Social Change, Elsevier, vol. 198(C).
    4. Peciulis Tomas & Vasiliauskaite Asta, 2024. "Effect of Monetary Policy Decisions and Announcements on the Price of Cryptocurrencies: An Elastic-Net With Arima Residuals Approach," Economics and Culture, Sciendo, vol. 21(1), pages 77-92.
    5. Scharnowski, Stefan, 2022. "Central bank speeches and digital currency competition," Finance Research Letters, Elsevier, vol. 49(C).
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    7. Chibane, Messaoud & Kuhanathan, Ano, 2023. "Is the fed failing to re-anchor expectations? An analysis of jumps in inflation swaps," Finance Research Letters, Elsevier, vol. 55(PB).

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    More about this item

    Keywords

    Bitcoin; Monetary policy; Emerging economies; Event study; Investor attention;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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