Job Market Paper
Bitcoin Cross Country Premium: the Effect of
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Price inconsistency between Bitcoin Exchanges has been widely observed and documented. Using Author’s self-collected daily panel data for 22 Bitcoin exchanges under 11 currencies, this study empirically examines the effect of regulation changes on Bitcoin cross country premium. To measure Bitcoin regulation changes, this study constructs an original country level Bitcoin regulation news index. Web crawler (scripted by author using Python) is used to collect Bitcoin regulation related reporting from news websites like CNBC, Reuters and Coindesk etc. Results of this paper suggest that tighter relative regulation increase level of market segmentation, which induce higher premium. By investigating the effect of each type of news individually, warning news and formal news are found to be the main driver of the result, and formal news have higher estimated effect on premium. This paper also identify the spillover effect from regulation change in other countries. Country’s Bitcoin premium is increasing as other countries tightening their Bitcoin regulations
Price Convergence of Bitcoin: a VECM Study
This paper studies the speed of convergence of Bitcoin across markets globally to find supportive evidence for LOOP. The data of this study includes Bitcoin trading data of 20 exchanges under 14 currencies, which is the most comprehensive Bitcoin dataset used in the literature. Cointegration analysis and Vector Error Correction Model are performed to investigate long run relationship and short run dynamics in Bitcoin markets. Empirical results of this study confirm the existence long run equilibrium in Bitcoin market. Half-lives of Bitcoin trading pairs are estimated using VEC model and range from 0.133 days to 6.93 days, which are significantly fast than half lives (range from months to several years) of other assets studied in previous literature. The fast speed of converge in Bitcoin markets implies efficient arbitraging activities, which provide strong evidence to support LOOP. Using estimated half-lives as data, this study also identifies border effect in Bitcoin markets.
Exchange Rate Volatility and Economic Growth: Importance of Access to Credit
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This paper empirically tests the effect of country’s domestic and international credit access on effect of exchange rate volatility on growth. This study uses annual panel data from 2003 to 2015 for 115 countries. System GMM estimation with two step standard error is used for regression analysis. Country’s financial development level is used to measure country’s domestic credit access, and country’s foreign bank presence level is used to measure country’s international credit access. This study finds that countries with higher level of financial development are less likely to be adversely affected by exchange rate volatility, and higher level of foreign bank presence can ameliorate the adverse growth effect of exchange rate volatility. The result of this paper implies that countries with high levels of credit access can use more flexible exchange rate regime since countries’ high credit access helps to insulate the economy from the adverse effect of exchange rate volatility. For countries with low credit access, exchange rate stability is important for economic growth so that it is preferable to use the fixed exchange rate regime.