Analysis of the impact of central bank digital currency on stock markets: Dynamics and implications
The purpose of the study is to explore the influence of central bank digital currency on stock markets. To realize the purpose, the TVP-VAR model was built, which determines the impact of volatility of the CBDC attention index (CBDCAI) on the volatility of stock market indices. The study uses a time...
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| Format: | Article |
| Language: | English |
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LLC "CPC "Business Perspectives"
2023-11-01
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| Series: | Banks and Bank Systems |
| Subjects: | |
| Online Access: | https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/19171/BBS_2023_04_Frolov.pdf |
| _version_ | 1827698037584035840 |
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| author | Serhiy Frolov Maksym Ivasenko Mariia V. Dykha Mykhaylo Heyenko Viktoriia Datsenko |
| author_facet | Serhiy Frolov Maksym Ivasenko Mariia V. Dykha Mykhaylo Heyenko Viktoriia Datsenko |
| author_sort | Serhiy Frolov |
| collection | DOAJ |
| description | The purpose of the study is to explore the influence of central bank digital currency on stock markets. To realize the purpose, the TVP-VAR model was built, which determines the impact of volatility of the CBDC attention index (CBDCAI) on the volatility of stock market indices. The study uses a time-varying vector autoregressive model that analyzes weekly data from the first week of January 2015 to the first week of July 2023. The endogenous vector to be assessed by VAR contains CBDCAI and stock market indices of different countries (France: CAC 40, The United States of America: S&P 500, Germany: DAX 40, United Kingdom: FTSE 100, China: SSEC, The Netherlands AEX 25, Switzerland: SMI 20, Japan: Nikkei 225, India: NIFTY 50, Brazil: BVSP, South Korea: KOSPI). The results of the TVP-VAR model show that compared to stock market indices, CBDCAI appeared to be relatively independent and isolated. Interdependence and mutual influence between the digital currency market of central banks and stock markets were also revealed. In addition, CBDC functions primarily as a volatility absorber rather than a source of volatility. Despite the overall ability of the CBDC market to absorb fluctuations in volatility, it may also change its function with the widespread adoption of central bank digital currencies in many countries. |
| first_indexed | 2024-03-10T13:22:01Z |
| format | Article |
| id | doaj.art-23861ae9e99f456c85b5fc6766a74884 |
| institution | Directory Open Access Journal |
| issn | 1816-7403 1991-7074 |
| language | English |
| last_indexed | 2024-03-10T13:22:01Z |
| publishDate | 2023-11-01 |
| publisher | LLC "CPC "Business Perspectives" |
| record_format | Article |
| series | Banks and Bank Systems |
| spelling | doaj.art-23861ae9e99f456c85b5fc6766a748842023-11-21T09:55:57ZengLLC "CPC "Business Perspectives"Banks and Bank Systems1816-74031991-70742023-11-0118414916810.21511/bbs.18(4).2023.1419171Analysis of the impact of central bank digital currency on stock markets: Dynamics and implicationsSerhiy Frolov0https://orcid.org/0000-0001-9374-7274Maksym Ivasenko1https://orcid.org/0009-0000-8981-2256Mariia V. Dykha2https://orcid.org/0000-0003-4405-9429Mykhaylo Heyenko3https://orcid.org/0000-0002-3249-1030Viktoriia Datsenko4https://orcid.org/0000-0002-4670-6848Doctor of Economics, Professor, Department of Finance of Business Entities and Insurance, Sumy National Agrarian UniversityPh.D. Student (Economics), Department of Finance, Banking and Insurance, Sumy National Agrarian UniversityDoctor of Economics Sciences, Professor, Professor of the Department of Economics, Analytics, Modeling and Information Technologies in Business, Khmelnytskyi National UniversityPh.D., Professor, Head of the Department of Finance, Banking and Insurance, Sumy National Agrarian UniversityPh.D., Senior Lecturer, Department of Marketing, University of Customs and Finance, Ukraine; Ph.D., Associate Professor, Dean of the Faculty of Economics, Business and International Relations, University of Customs and FinanceThe purpose of the study is to explore the influence of central bank digital currency on stock markets. To realize the purpose, the TVP-VAR model was built, which determines the impact of volatility of the CBDC attention index (CBDCAI) on the volatility of stock market indices. The study uses a time-varying vector autoregressive model that analyzes weekly data from the first week of January 2015 to the first week of July 2023. The endogenous vector to be assessed by VAR contains CBDCAI and stock market indices of different countries (France: CAC 40, The United States of America: S&P 500, Germany: DAX 40, United Kingdom: FTSE 100, China: SSEC, The Netherlands AEX 25, Switzerland: SMI 20, Japan: Nikkei 225, India: NIFTY 50, Brazil: BVSP, South Korea: KOSPI). The results of the TVP-VAR model show that compared to stock market indices, CBDCAI appeared to be relatively independent and isolated. Interdependence and mutual influence between the digital currency market of central banks and stock markets were also revealed. In addition, CBDC functions primarily as a volatility absorber rather than a source of volatility. Despite the overall ability of the CBDC market to absorb fluctuations in volatility, it may also change its function with the widespread adoption of central bank digital currencies in many countries.https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/19171/BBS_2023_04_Frolov.pdfattention indexcentral bankdigital currenciesindicesstock marketsTVP-VAR |
| spellingShingle | Serhiy Frolov Maksym Ivasenko Mariia V. Dykha Mykhaylo Heyenko Viktoriia Datsenko Analysis of the impact of central bank digital currency on stock markets: Dynamics and implications Banks and Bank Systems attention index central bank digital currencies indices stock markets TVP-VAR |
| title | Analysis of the impact of central bank digital currency on stock markets: Dynamics and implications |
| title_full | Analysis of the impact of central bank digital currency on stock markets: Dynamics and implications |
| title_fullStr | Analysis of the impact of central bank digital currency on stock markets: Dynamics and implications |
| title_full_unstemmed | Analysis of the impact of central bank digital currency on stock markets: Dynamics and implications |
| title_short | Analysis of the impact of central bank digital currency on stock markets: Dynamics and implications |
| title_sort | analysis of the impact of central bank digital currency on stock markets dynamics and implications |
| topic | attention index central bank digital currencies indices stock markets TVP-VAR |
| url | https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/19171/BBS_2023_04_Frolov.pdf |
| work_keys_str_mv | AT serhiyfrolov analysisoftheimpactofcentralbankdigitalcurrencyonstockmarketsdynamicsandimplications AT maksymivasenko analysisoftheimpactofcentralbankdigitalcurrencyonstockmarketsdynamicsandimplications AT mariiavdykha analysisoftheimpactofcentralbankdigitalcurrencyonstockmarketsdynamicsandimplications AT mykhayloheyenko analysisoftheimpactofcentralbankdigitalcurrencyonstockmarketsdynamicsandimplications AT viktoriiadatsenko analysisoftheimpactofcentralbankdigitalcurrencyonstockmarketsdynamicsandimplications |