CRYPTOCURRENCIES, MONEY DEMAND, AND MONETARY POLICY

Muhammad Zubair Mumtaz (), Zachary Alexander Smith () and Naoyuki Yoshino ()
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Muhammad Zubair Mumtaz: University of Bahrain, Bahrain
Zachary Alexander Smith: Saint Leo University, United States
Naoyuki Yoshino: Keio University, Japan

Bulletin of Monetary Economics and Banking, 2025, vol. 28, issue 2, 293-312

Abstract: This study examines the nexus between money demand and cryptocurrencies by estimating two simultaneous equations using Divisia indices as a proxy for money demand and volume traded for cryptocurrencies. The study examines the linkage between cryptocurrencies and money demand and their potential influence over monetary policy actions. It finds that the volume of cryptocurrencies traded negatively influences money demand. Moreover, we see a positive association between money demand and cryptocurrencies, implying that as the demand for money increases, the demand for cryptocurrencies increases. Further, we examine the determinates of cryptocurrencies and report that the return of cryptocurrencies, the financial development index, GDP, inflation, and stock market indices are significant predictors of the demand for cryptocurrencies.

Keywords: Money demand; Monetary policy; Cryptocurrencies (search for similar items in EconPapers)
JEL-codes: C22 C30 G14 G15 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:idn:journl:v:28:y:2025:i:2f:p:293-312

DOI: 10.59091/2460-9196.1722

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