CEPR Discussion Paper – Decrypting New Age International Capital Flows

Clemens Graf von Luckner, Carmen Reinhart, and Kenneth Rogoff

January 2023


This paper employs high frequency transactions data on the world’s two oldest and most extensive centralized peer-to-peer Bitcoin markets, which enables trade in the currencies of more than 160 countries. We develop an algorithm that allows us, with high probability, to detect “crypto vehicle transactions” in which crypto currency is used to move capital across borders, and/or to exchange one fiat currency for another. The data suggests that the use of Bitcoin has become an important channel to receive remittances and evade capital controls in emerging markets. This insight allows to develop a novel series for market-determined parallel exchange rates, a key indicator of macroeconomic imbalances; the series covers many countries and time periods where there is limited or no survey evidence, including the explosion of parallel rate premia since the pandemic.

Decrypting New Age International Capital Flows