Nexus between Monetary Indicators and Bitcoin in Selected Sub-Saharan Africa: A Panel ARDL
Abstract
The rapid adoption and growing prominence of Bitcoin and other cryptocurrencies have sparked significant interest and debate among economists, policymakers, and financial analysts. In Sub-Saharan Africa, where traditional financial systems often face challenges such as limited access to banking services, high transaction costs, and volatile currencies, Bitcoin presents both opportunities and risks. Understanding the interplay between Bitcoin and key monetary indicators such as monetary aggregates, exchange rates, and interest rates can provide valuable insights for policymakers and stakeholders in these economies. This study therefore seeks to investigate the nexus between monetary indicators and Bitcoin in selected Sub-Saharan African countries using a Panel ARDL (Autoregressive Distributed Lag) approach. The analysis focuses on understanding the dynamic relationship between key monetary variables, such as monetary aggregates, exchange rates, interest rates, and Bitcoin prices, from 2010 quarter three to 2022 quarter four. The findings reveal several significant relationships between monetary indicators and Bitcoin across the selected Sub-Saharan African countries. In the short run of the Panel Ardl monetary aggregates exhibit a positive relationship with Bitcoin prices, indicating that changes in the money supply may influence the demand for cryptocurrencies. Conversely, both exchange rates and interest rates show a negative relationship with Bitcoin prices in the short run, suggesting that currency depreciation and higher borrowing costs may reduce demand for Bitcoin. In the long run, the relationship between monetary aggregates and Bitcoin remains positive, emphasizing the potential influence of money supply on cryptocurrency markets over time. However, the significance of exchange rates diminishes, indicating a less pronounced impact in the longer term. Interestingly, interest rates continue to exhibit a significant negative relationship with Bitcoin prices in the long run, highlighting the persistent effect of borrowing costs on cryptocurrency demand. These results have important implications for policymakers, investors, and researchers interested in the intersection of monetary policy and cryptocurrency markets in Sub-Saharan Africa. Policymakers may consider the impact of monetary policy decisions on cryptocurrency adoption and market dynamics, while investors can use these insights to inform their investment strategies.
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