Return spillover analysis across central bank digital currency attention and cryptocurrency markets

Many central banks have now developed their digital currencies in response to the challenges posed by the proliferation of decentralised digital cryptocurrencies. However, little is known about the effects of the introduction of central bank digital currencies (CBDCs) on extant digital cryptocurrencies. This paper, therefore, aims to identify both the time- and frequency-domain spillover effects among cryptocurrency markets and a newly developed central bank digital currencies attention index (CBDCAI) by using two TVP-VAR-based spillover models. Our results demonstrate that CBDC attention significantly impacts cryptocurrency markets. Also, most investors in cryptocurrency markets are more likely to trade in the short term. The results of this study contribute to helping investors and investment institutions effectively avoid investment risks, reduce losses, and predict the return of some cryptocurrencies. Also help policymakers better understand the impact of markets and policies, and provide a reference for them to formulate policies.