Determining the economic impact of cryptocurrency adoption on international trade from a gravity model framework

Eric R. Chen

No cefj9, SocArXiv from Center for Open Science

Abstract: As cryptocurrencies develop and circulate at greater rates, countries have appeared to consider the technology as an adoptable medium of exchange. By expanding the influence of cryptocurrencies through adoption, countries raise its impact on the global economy. This paper is the first to apply an augmented version of the gravity model to examine the effects of global cryptocurrency adoption on international trade. This empirical study involves aggregating datasets on U.S. bilateral trade flows, gravity variable statistics, and the adoption of cryptocurrencies. In application of the gravity model, regression analyses are used on the aggregated data to test the magnitude of cryptocurrencies’ impact on trade. Based on the overall findings, the variables for cryptocurrency adoption produce negative coefficients suggesting a negative correlation between the adoption of cryptocurrencies and international trade. The central tendency in the empirical evidence offers the interpretation that countries with weak institutions to promote trade are more likely to adopt cryptocurrencies resulting in a negative association between cryptocurrency adoption and trade.

Date: 2021-12-30
New Economics Papers: this item is included in nep-cwa, nep-fdg, nep-int and nep-pay
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Persistent link: https://EconPapers.repec.org/RePEc:osf:socarx:cefj9

DOI: 10.31219/osf.io/cefj9

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