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Bitcoin price growth and Indonesia's monetary system

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  • Narayan, Paresh Kumar
  • Narayan, Seema
  • Eki Rahman, R.
  • Setiawan, Iwan

Abstract

Concerned by the volatility of Bitcoin price growth (BPG), Bank Indonesia—Indonesia's central bank—discourages trading cryptocurrencies. We examine the relationship between Bitcoin price growth (BPG) and Indonesia's monetary aggregates (inflation, real exchange rate, and money velocity). In doing so, we develop the conceptual link between Bitcoin and monetary aggregates. We find strong and robust evidence that BPG leads to inflation growth, currency appreciation, and a reduction in money velocity. Our results have policy implications for other central banks in terms of achieving stability of the monetary system if BPG is indeed a concern for those countries.

Suggested Citation

  • Narayan, Paresh Kumar & Narayan, Seema & Eki Rahman, R. & Setiawan, Iwan, 2019. "Bitcoin price growth and Indonesia's monetary system," Emerging Markets Review, Elsevier, vol. 38(C), pages 364-376.
    • Handle: RePEc:eee:ememar:v:38:y:2019:i:c:p:364-376
    DOI: 10.1016/j.ememar.2018.11.005
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