Program and Development Research

Program and Development Research

Asymmetric Effects of Government Monetary and Fiscal Policies on the Cryptocurrency Market: Evidence from Hayek’s Private Money Theory Using a Nonlinear Distributed Lag Autoregressive Approach

Document Type : Original Article

Authors
Jafar Saeinya 1
Attaallah Rafiei Atani 2
Nader Hkimipour 3
1 M.A. in Economics, Iran University of Science and Technology, Tehran, Iran
2 Assistant Professor of Economics, School of Progress Engineering, Iran University of Science and Technology, Tehran, Iran
3 Assistant Professor, Statistical Research and Training Center, and Director General, Price Index Office, Statistical Center of Iran
10.22034/pbr.2025.522102.1527
Abstract
Hayek introduced the concept of private money as a competitor to government-issued currency, intended to break the state’s monopoly over currency issuance and provide a decentralized alternative. Many studies interpret digital currencies as modern instances of private money. According to Hayek’s theory, however, private money should remain largely unaffected by government monetary and fiscal policies. This study tests this proposition in the cryptocurrency market by examining Bitcoin and the United States, given the country’s pioneering role in cryptocurrency adoption and development. Employing monthly data from January 2014 to December 2024, we apply a Nonlinear Autoregressive Distributed Lag (NARDL) model to analyze the asymmetric effects of government policies on Bitcoin. This study investigates the asymmetric effects of government monetary and fiscal policies on Bitcoin prices. The results reveal a nonlinear relationship between these policies and Bitcoin, with bounds and Wald tests confirming significant asymmetric effects. In the long run, interest rates (monetary policy) do not significantly affect Bitcoin prices, although negative shocks have a meaningful short-term impact. Fiscal policy, specifically budget deficits, exerts a positive and significant long-term effect, while taxes display a significant asymmetric and nonlinear influence on Bitcoin prices. These findings indicate that, despite efforts to operate independently of the traditional financial system, Bitcoin has not functioned as a fully private currency insulated from government policy.
Keywords
Cryptocurrencies؛ Hayek&rsquo
s Private Money Theory؛ Monetary Policy؛ Fiscal Policy

Subjects

Afshar, H. R., & Aghaei Meybodi, A. H. (2023). Examining the effects of central bank digital currency issuance on Iran’s macroeconomy. Defense Economics and Sustainable Development Quarterly, 388, 151–183.
Torabi, M. A. (2021). A systematic review of digital currency: Forecasting the future of Bitcoin in 2022. New Business Perspectives Quarterly, 2(5), 1–14.
Hosseini Moghaddam, S. H., & Farzinfar, B. (2019). Analysis of blockchain networks and cryptocurrency transactions from the perspective of Iranian law and Shi’a jurisprudence. Fars Legal Research Journal, 2(5), 27–45.
Zand, F., Akbariyan, R., Sadrayi Javaheri, A., & Parsa, H. (2023). The effects of monetary shocks on Iran’s macroeconomic performance in the presence of cryptocurrency: A DSGE approach. Economic Modeling Research, 14(52), 1–59.
Nouri, M., & Navabpour, A. (2017). Designing a conceptual policy-making framework for virtual currencies in Iran’s economy. Public Policy Quarterly, 3(4), 51–78.
Altavilla, C., Pagano, M., & Simonelli, S. (2017). Bank exposures and sovereign stress transmission. Review of Finance, 21(6), 2103-2139.
Ammous, S. (2018). El patrón Bitcoin: la alternativa descentralizada a los bancos centrales. Barcelona: Deusto.
Baur, D. G., Hong, K., & Lee, A. D. (2018). Bitcoin: Medium of exchange or speculative assets? Journal of International Financial Markets, Institutions and Money, 54, 177-189.
Bekaert, G., Hoerova, M., & Lo Duca, M. (2013). Risk, uncertainty and monetary policy. Journal of Monetary Economics, 60(7), 771-788.
Bouri, E., Azzi, G., & Dyhrberg, A. H. (2017). On the return-volatility relationship in the Bitcoin market around the price crash of 2013. Economics, 11(1), 1-17.
Caporale, G. M., Spagnolo, F., & Spagnolo, N. (2018). Macro news and bond yield spreads in the euro area. The European Journal of Finance, 24(2), 114-134.
Chudinova, E. V. (2020). The concept of private money and its use in the modern world. Хроноэкономика, 1(22), 61-64.
Chuen, D. L. K. (2015). Handbook of Digital Currency: Bitcoin, Innovation, Financial Instruments, and Big Data. Elsevier.‏
Cong, L. W., & He, Z. (2019). Blockchain disruption and smart contracts. The Review of Financial Studies, 32(5), 1754-1797.
Corbet, S., Larkin, C., Lucey, B., Meegan, A., & Yarovaya, L. (2020). Cryptocurrency reaction to fomc announcements: Evidence of heterogeneity based on blockchain stack position. Journal of Financial Stability, 46, 1-27.
Corbet, S., Lucey, B., Peat, M., & Vigne, S. (2018). Bitcoin Futures—What use are they? Economics Letters, 172, 23-27.
De Filippi, P. (2014). Bitcoin: a regulatory nightmare to a libertarian dream. Internet Policy Review: Journal on Internet Regulation, 3(2), 1-11.
Dyck, A., & Zingales, L. (2003). The media and asset prices. Working Paper, Harvard Business School.‏
Eken, S. (2005). Macroeconomic impact of remittances. In OECD (Ed.), Migration, remittances, and development (pp. 193-196). Paris: OECD.
Elder, J., Miao, H., & Ramchander, S. (2012). Impact of macroeconomic news on metal futures. Journal of Banking & Finance, 36(1), 51-65.
Fernández‐Villaverde, J. (2018). Cryptocurrencies: A crash course in digital monetary economics. Australian Economic Review, 51(4), 514-526.
Fisher, I. (1993). Stamp Scrip. Adelphi Company.
Frisby, D. (2014). Bitcoin: the future of money? Unbound Publishing.
Gali, J., & Monacelli, T. (2008). Optimal monetary and fiscal policy in a currency union. Journal of international economics, 76(1), 116-132.‏
Gaurav, S. (2019). The market for cryptocurrencies. Economic & Political Weekly, 54(2), 12-15.‏
Greco, T. H. (2001). Money: Understanding and Creating Alternatives to Legal Tender. Chelsea Green Publishing.
l of Banking & Finance, 35(10), 2733-2746.
Hayek, F. A. (1999). The Collected Works of F. A. Hayek: Good Money, Part II, Stephen Kresge (ed), Chicago: The University of Chicago Press.
Hayek, F. A. (1999b [1978]). Denationalization of money. In Kresge, S. (Ed.) Good Money, Part II: The Standard. Volume 6 of the Collected Works of F. A. Hayek. Chicago, IL: University of Chicago Press.
Holmstrom, B., & Tirole, J. (2011). Inside and Outside Liquidity. The MIT Press.
Kurov, A., & Stan, R. (2018). Monetary policy uncertainty and the market reaction to macroeconomic news. Journal of Banking & Finance, 86, 127-142.
Medovikov, I. (2016). When does the stock market listen to economic news? New evidence from copulas and news wires. Journal of Banking & Finance, 65, 27-40.
Nguyen, T. V. H., Nguyen, B. T., Nguyen, K. S., & Pham, H. (2019). Asymmetric monetary policy effects on cryptocurrency markets. Research in International Business and Finance, 48, 335-339.‏
Oh, J. H., & Nguyen, K. (2018). The growing role of cryptocurrency: what does it mean for central banks and governments. International Telecommunications Policy Review, 251, 33-55.
Sensoy, A. (2019). The inefficiency of Bitcoin revisited: A high-frequency analysis with alternative currencies. Finance Research Letters, 28, 68-73.
Sichinava, D. (2019). Cryptocurrency and Prospects of its Development. Ecoforum Journal, 8(2), 1-4.
Siganos, A., Vagenas-Nanos, E., & Verwijmeren, P. (2017). Divergence of sentiment and stock market trading. Journal of Banking & Finance, 78, 130-141.
Urquhart, A. (2016). The inefficiency of Bitcoin. Economics Letters, 148, 80-82.
Program and Development Research
Volume 6, Issue 2 - Serial Number 22
Summer 2025
Pages 117-145