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Global M2 money supply and Bitcoin relationship: A time-varying causality approach
Jönköping University, Jönköping International Business School, JIBS, Economics.
Jönköping University, Jönköping International Business School, JIBS, Economics.
2025 (English)Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

The relationship between Bitcoin and global liquidity is an important topic in studying monetaryand financial economics. The purpose of this paper is to examine the Granger causality relationship between the Bitcoin price and world M2 money supply using a time-varying approach.By employing forward expanding, rolling window, and recursive evolving methodology, the analysis shows that the impact of global money supply on Bitcoin is not constant, but fluctuates across time. Two periods with significant Granger causality are then analyzed using nested Vector Autoregression, identifying asymmetry in one period while the other does not.The results suggest that while an expansion in M2 can drive up the price of Bitcoin, a contraction in liquidity can cause an asymmetric response. Also, in certain periods, Granger causality suggests the existence of external economic factors that affect both variables. These findings contribute to understanding the role of Bitcoin as a potential inflation hedge and emphasize its sensitivity to changes in global liquidity conditions, which may help institutions refine their investment strategies and manage the risks associated with currency fluctuations.

Place, publisher, year, edition, pages
2025. , p. 29
Keywords [en]
M2 money supply, Bitcoin, TVGC, granger causality, nested VAR
National Category
Economics
Identifiers
URN: urn:nbn:se:hj:diva-68605OAI: oai:DiVA.org:hj-68605DiVA, id: diva2:1970754
Subject / course
JIBS, Economics
Supervisors
Examiners
Available from: 2025-06-24 Created: 2025-06-17 Last updated: 2025-10-13Bibliographically approved

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CiteExportLink to record
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Citation style
  • apa
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