A study of Bitcoin price's relationship with local currency exchange rate and stock market index in emerging economies using VECM

Yunfei Song, Fordham University

Abstract

This study gave an overview of the development of Bitcoin and several key economic aspects of its network. Using Johansen’s method, it explored the co-integration relationship among Bitcoin price, local currency exchange rate and stock market index in selected emerging economies. It investigated Bitcoin price’s impact on these local currency exchange rates and their stock market indices respectively using the Vector Error Correction Model (VECM). It further demonstrated these impacts using the Impulse Response Function. The findings in this study indicate that Bitcoin price co-integrates with the local currencies’ exchange rates, with Mexico and Russia being the exception. Despite different short-term responses, in the long term, local currency tends to strengthen against dollar given a decrease of Bitcoin price in the local currency, or an increase of Bitcoin price in dollar. In addition, stock market index’s response to a positive shock on Bitcoin price varies across economies, some saw stick rally while others selloff.^

Subject Area

Economics

Recommended Citation

Song, Yunfei, "A study of Bitcoin price's relationship with local currency exchange rate and stock market index in emerging economies using VECM" (2016). ETD Collection for Fordham University. AAI10246887.
http://fordham.bepress.com/dissertations/AAI10246887

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