Do clean and dirty cryptocurrencies connect with financial assets differently? The role of economic policy uncertainty

Kun Duan, Yanqi Zhao, Andrew Urquhart and Yingying Huang

Energy Economics, 2023, vol. 127, issue PA

Abstract: This paper analyzes time-varying networks of clean and dirty cryptocurrencies with green and traditional assets through a dynamic connectedness approach established by the time-varying parameter vector autoregressive (TVP-VAR) model. The underlying asymmetry of the dynamic pairwise connectedness when facing uncertainty shocks is further studied through a non-parametric quantile causality method. Our results demonstrate a limited information transmission of volatility from cryptocurrencies to both traditional and green assets, while the connection of clean cryptocurrencies (CI) with the financial system is even weaker compared to that of dirty cryptocurrencies (DI), especially after the COVID-19 pandemic. In contrast, connection within the financial system is found to be relatively closer. Moreover, causal relationships between economic policy uncertainty (EPU) and cryptocurrency-financial asset linkages are generally enhanced after the pandemic onset, while such the causality of uncertainty with DI related asset linkages tends to be even stronger. Most of the above causalities are shown to be negligible during market depression, further implying the sheltering role of the market linkages against uncertainty.

Keywords: Clean cryptocurrencies; Dirty cryptocurrencies; Green assets; Traditional assets; Time-varying networks; Nonlinear causality (search for similar items in EconPapers)
JEL-codes: G10 G11 G15 Q4 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:127:y:2023:i:pa:s0140988323005777

DOI: 10.1016/j.eneco.2023.107079

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