Bitcoin Reveals Exchange Rate Manipulation and Detects Capital Controls

Gina Pieters

2017 Papers from Job Market Papers

Abstract: Many countries manipulate the value of their currency or use some form of capital control, yet the data usually used to detect these manipulations are low frequency, expensive, lagged, and potentially mismeasured. I demonstrate that the price data of the internationally traded cryptocurrency Bitcoin can approximate unocial exchange rates which, in turn, can be used to detect both the existence and the magnitude of the distortion caused by capital controls and exchange rate manipulations. However, I document that bitcoin exchange rates contain problematic bitcoin-market-speci c elements and must be adjusted before being used for this purpose. As bitcoin exchange rates exist at a daily frequency, they reveal transitory interventions that would otherwise go undetected. This result also serves as veri cation that Bitcoin is used to circumvent capital controls and manipulated exchange rates.

JEL-codes: E42 F30 F31 F38 G15 (search for similar items in EconPapers)
Date: 2017-11-20
New Economics Papers: this item is included in nep-mac, nep-mon and nep-pay
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Citations: View citations in EconPapers (1)

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