Dear all PUBLISH0X people :)
I have written a policy for African Institute for Decentralised Finance and Blockchain (AIDBLOCK) regarding cryptocurrencies and international financial institutions such as the IMF, BiS, and G20.
At the moment, I am in the process of finalizing a new paper focusing on crypto and public monetary policies regarding central banks, governments, and CBDCs.
“International monetary policy and cryptocurrency markets: dynamic and spillover“, academics Ahmed H. Elsayed Ricardo M. Sousa analyze international monetary policy's dynamic and spillover effects on cryptocurrency markets, specifically focusing on Bitcoin, Ethereum, and Ripple. The study examines the impact of monetary policy shocks from the United States, the Eurozone, Japan, and the United Kingdom on these cryptocurrencies' returns, volatilities, and cross-market correlations.
The authors employ a vector autoregression (VAR) framework, using daily data from January 2015 to December 2020, to analyze the relationship between monetary policy variables and cryptocurrency market dynamics, including short-term interest rates, exchange rates, stock market indices, and cryptocurrency returns. The authors also implement a spillover index, which measures the total volatility spillover among the variables, to understand the transmission mechanism of monetary policy shocks to cryptocurrency markets. The key findings of the paper are, among other things, that monetary policy shocks have significant effects on the returns and volatilities of Bitcoin, Ethereum, and Ripple. While tightening monetary policy by increasing interest rates leads to declining cryptocurrency returns, expansionary monetary policy by lowering interest rates results in higher cryptocurrency returns.
They also argue that the impact of monetary policy shocks is more pronounced for Bitcoin than Ethereum and Ripple, implying that Bitcoin is more sensitive to global monetary policy changes. Also, the spillover index reveals that the volatility spillover from monetary policy variables to cryptocurrency markets has increased over time. Their study indicates that cryptocurrencies have become more integrated with global financial markets, and monetary policy decisions by major central banks have a growing influence on cryptocurrency market dynamics.
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