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Cryptocurrencies, Money Demand, and Monetary Policy

Author

Listed:
  • Muhammad Zubair Mumtaz

    (University of Bahrain, Bahrain)

  • Zachary Alexander Smith

    (Saint Leo University, United States)

  • Naoyuki Yoshino

    (Keio University, Japan)

Abstract

This study examines the nexus between money demand and cryptocurrencies by estimating two simultaneous equations using Divisia indices as a proxy for money demand and volume traded for cryptocurrencies. The study examines the linkage between cryptocurrencies and money demand and their potential influence over monetary policy actions. It finds that the volume of cryptocurrencies traded negatively influences money demand. Moreover, we see a positive association between money demand and cryptocurrencies, implying that as the demand for money increases, the demand for cryptocurrencies increases. Further, we examine the determinates of cryptocurrencies and report that the return of cryptocurrencies, the financial development index, GDP, inflation, and stock market indices are significant predictors of the demand for cryptocurrencies.

Suggested Citation

  • Muhammad Zubair Mumtaz & Zachary Alexander Smith & Naoyuki Yoshino, 2025. "Cryptocurrencies, Money Demand, and Monetary Policy," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 28(2), pages 293-312, July.
    • Handle: RePEc:idn:journl:v:28:y:2025:i:2f:p:293-312
    DOI: https://doi.org/10.59091/2460-9196.1722
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    References listed on IDEAS

    as
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    Keywords

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    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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