Bitcoin price growth and Indonesia's monetary system.

Abstract Concerned by the volatility of Bitcoin price growth (BPG), Bank Indonesia—Indonesia's central bank—discourages trading cryptocurrencies. We examine the relationship between Bitcoin price growth (BPG) and Indonesia's monetary aggregates (inflation, real exchange rate, and money velocity). In doing so, we develop the conceptual link between Bitcoin and monetary aggregates. We find strong and robust evidence that BPG leads to inflation growth, currency appreciation, and a reduction in money velocity. Our results have policy implications for other central banks in terms of achieving stability of the monetary system if BPG is indeed a concern for those countries. Highlights • We test whether Bitcoin price growth (BPG) influences Indonesia's monetary aggregates. • We develop the conceptual link between BPG and monetary aggregates. • Robust evidence is found that BPG leads to inflation growth. • BPG contributes to currency appreciation, and a reduction in money velocity. • Results have policy implications for other central banks in terms of achieving stability. [ABSTRACT FROM AUTHOR]