Directional predictability from central bank digital currency to cryptocurrencies and stablecoins

Ahmed Ayadi, Yosra Ghabri and Khaled Guesmi

Research in International Business and Finance, 2023, vol. 65, issue C

Abstract: This paper investigates the interaction and the directional predictability between the central bank digital currencies (CBDCs) and the major cryptocurrencies and stablecoins during the period between 17 May, 2019–31 December, 2021. To this aim, we employ the "Cross-Quantilogram” model, to examine how and whether the traditional digital currencies react to the CBDC uncertainty and attention shocks. Our findings suggest that CBDC uncertainty index is negatively related to cryptocurrency and stablecoin returns. Furthermore, the CBDC attention index is negatively associated with Bitcoin, Ethereum, XPR and Terra USD, however, it is positively related to Tether, Binance, USD Coin and Dai. Our results are useful for regulators, investors and policy makers, to understand and assess the potential effect of CBDC adoption news on the volatility of the stablecoins and traditional cryptos.

Keywords: CBDC; Cryptocurrencies; Stablecoins; Directional predictability; Cross-Quantilogram model (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:65:y:2023:i:c:s0275531923000351

DOI: 10.1016/j.ribaf.2023.101909

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