FINANCIAL DIGITAL ASSETS AND THEIR INTERACTIONS WITH THE TRADITIONAL FINANCIAL MARKETS: A DSGE ANALYSIS

Andrei-Dragos Popescu and Cristi Spulbar
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Andrei-Dragos Popescu: PhD Student, Doctoral School of Economic Sciences, University of Craiova, Craiova, Romania
Cristi Spulbar: Professor, Doctoral School of Economic Sciences, University of Craiova, Craiova, Romania

Social Sciences and Education Research Review, 2023, vol. 10, issue 1, 284-313

Abstract: We start from the premise that all markets, regardless of the shocks they experience, tend toward equilibrium. This is a characteristic that has been identified for any type of market, as the balance is required to be achieved in order for them to evolve. We are evolving a Dynamic General Stochastic Equilibrium model (DSGE) in order to assess and analysis the capital flows of shocks identified within different digital and traditional markets. The model is based on the fundamental theory of general equilibrium which attempts to describe the fluctuations based on supply, demand, and prices in a whole economic scenario, where all markets interact with each other. For our analysis, we have used the historical price data from various financial digital assets and traditional finance markets, with a quarterly time frame from January 2016 to October 2022. The findings show that when a productivity shock occurs, all of the variables respond in a favorable manner, aligning with our utility function and the equations defined in our methodologies. The results reveal that the market is able to adjust and adapt to changes in productivity, leading to an overall improvement in economic performance, and also demonstrates the versatility and applicability of the model in various market contexts. Understanding these relationships is crucial for investors and policymakers to make informed decisions and navigate the interdependencies between traditional finance markets and the digital economy.

Keywords: FINANCIAL DIGITAL ASSETS; financial markets; dgse (search for similar items in EconPapers)
JEL-codes: E32 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:edt:jsserr:v:10:y:2023:i:1:p:284-313

DOI: 10.5281/zenodo.8241416

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