Cryptocurrency return dependency and economic policy uncertainty

Kuang-Chieh Yen, Wei-Ying Nie, Hsuan-Ling Chang and Li-Han Chang

Finance Research Letters, 2023, vol. 56, issue C

Abstract: This study investigated whether economic policy uncertainty (EPU) affects the degree of Bitcoin return dependency in the cryptocurrency (crypto) market by calculating the Pearson correlation between Bitcoin returns and the average returns of 19 cryptocurrencies to determine the return dependency. First, we found that an increase in global EPU strengthens the dependency effect. Among the country-level EPU indexes, we found that the increased EPU of crypto-friendly countries (United States, United Kingdom, Japan, and South Korea) is the main enhancer of dependency. By contrast, the EPU index of crypto-unfriendly countries (China and Russia) exhibits a statistically nonsignificant effect. Finally, the empirical results remain similar if we replace Bitcoin with Ethereum to measure dependency.

Keywords: Bitcoin; Cryptocurrencies; Dependency effect; economic policy uncertainty (EPU) (search for similar items in EconPapers)
JEL-codes: D81 G15 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:56:y:2023:i:c:s1544612323005548

DOI: 10.1016/j.frl.2023.104182

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