The Effect of Central Bank Digital Currencies News on Financial Markets

63 Pages Posted: 18 Nov 2021

See all articles by Yizhi Wang

Yizhi Wang

Trinity College (Dublin) - Trinity Business School

Brian M. Lucey

Trinity Business School, Trinity College Dublin; Ho Chi Minh City University of Economics and Finance; Jiangxi University of Finance and Economics

Samuel Vigne

Trinity College (Dublin) - Trinity Business School

Larisa Yarovaya

University of Southampton - Southampton Business School

Date Written: October 29, 2021

Abstract

Based on the coverage of over 660m news stories from LexisNexis News & Business between 2015–2021, we provide two new indices around the growing area of Central Bank Digital Currencies (CBDC): the CBDC Uncertainty Index (CBDCUI) and CBDC Attention Index (CBDCAI). We show that both indices spiked during news related to new developments in CBDC and in relation to digital currency news items. We demonstrate that CBDC indices have a significant negative relationship with the volatilities of the MSCI World Banks Index, USEPU, and the FTSE All-World Index, and positive with cryptocurrency markets volatility, VIX, and gold. Our results suggest that financial markets are more sensitive to CBDC Uncertainty than CBDC Attention as proxied by these indices.

Keywords: CBDC, Uncertainty and attention index, Market effect, SVAR, DCC-GJR-GARCH

JEL Classification: C43, C58, D80, E42, E58, F31, G15, G21

Suggested Citation

Wang, Yizhi and Lucey, Brian M. and Vigne, Samuel and Yarovaya, Larisa, The Effect of Central Bank Digital Currencies News on Financial Markets (October 29, 2021). Available at SSRN: https://ssrn.com/abstract=3952729 or http://dx.doi.org/10.2139/ssrn.3952729

Yizhi Wang

Trinity College (Dublin) - Trinity Business School ( email )

Aras an Phiarsaigh
College Green
Dublin, Leinster D2
Ireland

Brian M. Lucey (Contact Author)

Trinity Business School, Trinity College Dublin ( email )

The Sutherland Centre, Level 6, Arts Building
Dublin 2
Ireland
+353 1 608 1552 (Phone)
+353 1 679 9503 (Fax)

Ho Chi Minh City University of Economics and Finance ( email )

59C Nguyen Dình Chieu
6th Ward, District 3
Ho Chi Minh City, Ho Chi Minh 70000
Vietnam

Jiangxi University of Finance and Economics ( email )

South Lushan Road
Nanchang, Jiangxi 330013
China

Samuel Vigne

Trinity College (Dublin) - Trinity Business School ( email )

Aras an Phiarsaigh
College Green
Dublin, Leinster D2
Ireland

Larisa Yarovaya

University of Southampton - Southampton Business School ( email )

Highfield
University Road
Southampton, SO17 1BJ
United Kingdom

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