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Decrypting new age international capital flows

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  • Graf von Luckner, Clemens
  • Reinhart, Carmen M.
  • Rogoff, Kenneth

Abstract

This paper employs high frequency transactions data on the world's two oldest and most extensive centralized peer-to-peer Bitcoin markets, enabling trade in the currencies of more than 160 countries. We develop an algorithm that allows us, with high probability, to detect “crypto vehicle transactions” in which crypto currency is used to move capital across borders, and/or to exchange one fiat currency for another. The data suggest that the use of Bitcoin has become an increasingly important channel to receive remittances and evade capital controls in emerging markets. Two event studies on Venezuela and Argentina provide supporting evidence.

Suggested Citation

  • Graf von Luckner, Clemens & Reinhart, Carmen M. & Rogoff, Kenneth, 2023. "Decrypting new age international capital flows," Journal of Monetary Economics, Elsevier, vol. 138(C), pages 104-122.
    • Handle: RePEc:eee:moneco:v:138:y:2023:i:c:p:104-122
    DOI: 10.1016/j.jmoneco.2023.05.015
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    2. Kenneth S. Rogoff, 2022. "The Mayekawa Lecture: Institutional Innovation and Central Bank Independence 2.0," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 40, pages 25-38, November.
    3. Alnasaa, Marwa & Gueorguiev, Nikolay & Honda, Jiro & Imamoglu, Eslem & Mauro, Paolo & Primus, Keyra & Rozhkov, Dmitriy, 2022. "Crypto-assets, corruption, and capital controls: Cross-country correlations," Economics Letters, Elsevier, vol. 215(C).
    4. Saggese, Pietro & Belmonte, Alessandro & Dimitri, Nicola & Facchini, Angelo & Böhme, Rainer, 2023. "Arbitrageurs in the Bitcoin ecosystem: Evidence from user-level trading patterns in the Mt. Gox exchange platform," Journal of Economic Behavior & Organization, Elsevier, vol. 213(C), pages 251-270.
    5. Adrián Armas & Lucero Ruiz & José Luis Vásquez, 2022. "Assessing CBDC potential for developing payment systems and promoting financial inclusion in Peru," BIS Papers chapters, in: Bank for International Settlements (ed.), CBDCs in emerging market economies, volume 123, pages 131-151, Bank for International Settlements.
    6. Karau, Sören, 2023. "Monetary policy and Bitcoin," Journal of International Money and Finance, Elsevier, vol. 137(C).
    7. Feyen,Erik H.B. & Kawashima,Yusaku & Mittal,Raunak, 2022. "Crypto-Assets Activity around the World : Evolution and Macro-Financial Drivers," Policy Research Working Paper Series 9962, The World Bank.

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    More about this item

    Keywords

    Cryptocurrencies; Bitcoin; International capital flows; Transactions; Speculative bubbles;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F38 - International Economics - - International Finance - - - International Financial Policy: Financial Transactions Tax; Capital Controls
    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances

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