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Have Bitcoin Price Growth Destabilised Indonesia’s Monetary System?

R. Eki Rachman, Bank Indonesia Institute, Bank Indonesia

Iwan Setiawan, Bank Indonesia Institute, Bank Indonesia

Mailing Address

Eki Rachman
Bank Indonesia Institute
Bank Indonesia
Jakarta, Indonesia
Telephone: XXXXXX


Have Bitcoin Price Growth Destabilised Indonesia’s Monetary System?


We examine the effect of bitcoin price growth (BPG) and its volatility on Indonesian monetary

aggregates. We find no evidence that BPG predicts Indonesia’s monetary aggregates but reveals

that BPG volatility predicts exchange rate returns and money velocity. We discover no evidence

that volatilities of these aggregates are predictable either. Our results are robust to multiple

additional tests including the use of control variables, different model specifications, and sub-

sampling analysis. Our results have policy implications for other central banks in terms of reining

in stability in the monetary system if bitcoin price growth is a concern.

Keywords: Bank Indonesia; Monetary Aggregates; Predictability; Robustness Tests.


Table I: Descriptive statistics of data

This table reports selected descriptive statistics of the data. The data series is noted in column1: BITCOIN and
GBITCOIN are bitcoin price in US dollars and GBITCOIN is the growth rate of BITCOIN; CPI stands for conumser
price index and INFLATION is the growth rate in CPI; ER stands for bilateral exchange rate (Rupiah per US dollar)
while GER is simply the growth rate of ER; VM1 and VM2 stand for money velocity (M1 and M2 scaled by nominal
gross domestic product (GDP))l and IR_1 and IR_2 are, respectively, the 1-month and 3-month interest rate series.
For each of the 11 time-series data, we report mean, standard deviation (SD), maximum. Minimum. Skewness,
kurtosis, and ADF test statistics. The ADF test is based on a model with a constant only. The optimal lag length used
to control for serial correlation is obtained using the Schwarz information criteria. We set the maximum lag length to
8. The p-values testing the null hypothesis of a unit root are reported.

Variables Mean SD Maximum Minimum Skewness Kurtosis ADF

BITCOIN 682.36 1258.30 7828.43 2.97 3.71 18.23 0.99
CPI 125.79 11.98 143.21 106.42 -0.15 1.63 0.85
ER 11813.08 1752.85 14645.00 8780.00 -0.43 1.65 0.47
GDP 904058.80 149610.80 1173821.00 670756.80 0.11 1.88 0.99
VM1 0.94 0.04 1.05 0.85 -0.06 3.00 0.31
VM2 0.23 0.01 0.26 0.21 0.98 4.03 0.03
INFLATION 0.40 0.54 3.02 -0.45 2.29 10.92 0.00
GER 0.61 2.17 6.05 -6.85 -0.17 4.99 0.00
IR_1 6.13 1.27 8.55 3.98 0.04 1.87 0.45
IR_3 6.56 1.29 8.86 4.21 -0.27 1.85 0.34
GBITCOIN 8.85 27.40 127.37 -50.57 1.30 7.12 0.00