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The Relationship Between USD/EUR Official Exchange Rates And Implied Exchange Rates From The Bitcoin Market

Author

Listed:
  • Hélder Sebastião

    (Centre for Business and Economics CeBER and Faculty of Economics, University of Coimbra)

  • Pedro Godinho

    (Centre for Business and Economics CeBER and Faculty of Economics, University of Coimbra)

Abstract

We examine the long- and short-run relationships between USD/EUR official rates and implicit exchange rates, through Bitcoin as a currency vehicle, over the period from March 07, 2016 to November 22, 2019. The results show that the two exchange rates are cointegrated and that the cointegrating vector is not statistically different from the theoretical one that results from the law of one price. In the short-run, the implied rate Granger-causes the official reference rate. Our main conclusion is that Bitcoin USD and EUR prices incorporate fundamental information from the USD/EUR official exchange rate.

Suggested Citation

  • Hélder Sebastião & Pedro Godinho, 2020. "The Relationship Between USD/EUR Official Exchange Rates And Implied Exchange Rates From The Bitcoin Market," CeBER Working Papers 2020-02, Centre for Business and Economics Research (CeBER), University of Coimbra.
    • Handle: RePEc:gmf:papers:2020-02
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    File URL: https://bee.fe.uc.pt/working-paper/pdf/bc6e33821b2f4ab0abf42b9a5d44dbf5/HSebasti%C3%A3o%20%20PGodinho_.pdf
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    More about this item

    Keywords

    Bitcoin; USD/EUR; Exchange rates; Cointegration; Forecasting.;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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