DIGITAL CURRENCIES AND MACROECONOMIC PERFORMANCE: A GLOBAL PERSPECTIVE

Abstract

In this study, we explore the IS-LM-BP framework in analysing the effect of digital currencies on macroeconomic performance from a global perspective. We augment the global macroeconomic dataset by Mohaddes and Raissi (2020) with digital currencies and analyse the relationship between 2010Q1 and 2019Q4. Overall, we find that digital currencies exert a significantly positive short-run effect but no long-run impact on global output, inflation rate, interest rate, equity stock return, and exchange rate. Our results suggest that digital currencies have enhanced global macroeconomic performance, on average. Thus, we recommend that appropriate regulations, rather than an outright ban on digital currencies, should be implemented.