Business

Financial and market risks of bitcoin adoption as legal tender: evidence from El Salvador

G. Msefula, T. C. Hou, et al.

This study, conducted by Griffin Msefula, Tony Chieh-Tse Hou, and Tina Lemesi, delves into the impacts of El Salvador's Bitcoin adoption on financial stability. With revealing insights from a structural vector autoregressive model, discover how Bitcoin affects remittances, the money multiplier, and gold prices, highlighting both promising international business opportunities and risks to monetary policy.

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Playback language: English

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Abstract

El Salvador's adoption of Bitcoin as legal tender in June 2021 has raised concerns about financial stability. This study analyzes monthly data from 2010 to 2022 using a structural vector autoregressive (SVAR) model to estimate Bitcoin's impact on remittances, the money multiplier, the US Dollar index, and gold prices. Results show that Bitcoin price decreases the money multiplier and gold prices in both the short and long run, while remittances moderately increase in the long run. The study suggests potential international business opportunities but also highlights risks to monetary policy.

Publisher

Humanities & Social Sciences Communications

Published On

Oct 22, 2024

Authors

Griffin Msefula, Tony Chieh-Tse Hou, Tina Lemesi

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