 Forecasting macroeconomic effects of stablecoin adoption: A Bayesian approachMartin M. Bojaj, Milica Muhadinovic, Andrej Bracanovic, Andrej Mihailovic, Mladen Radulovic, Ivan Jolicic, Igor Milosevic and Veselin Milacic Economic Modelling, 2022, vol. 109, issue C Abstract: This study analyzes the effect of stablecoin adoption on key macroeconomic factors in Montenegro. The main explanation for the adoption of stablecoins is their one-to-one peg to various currencies and commodities. Previous studies have relied on the relationships among cryptocurrencies and thus could not disentangle the country-level macroeconomic effects of stablecoins from the effects of other cryptocurrencies. Using data from January 2006 to December 2019, we decompose the correlation between cryptocurrencies and their effects on the economy due to (a) shocks to stablecoins and (b) shocks to Bitcoin. Contrary to assumptions, stablecoins do not maintain their peg in “crash times” but do promote economic growth. Bitcoin's volatility deanchors investor expectations, disrupts markets, and destabilizes key macroeconomic factors. Our novel findings indicate that stablecoin adoption should not be based only on a one-to-one assumption and reveal the mechanism of key gaps by a prudential authority. Keywords: Bitcoin; Connectedness; Forecast; Macroeconometrics; Policy objective; Stablecoin adoption (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:109:y:2022:i:c:s0264999322000384 DOI: 10.1016/j.econmod.2022.105792 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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