Categorical uncertainty in policy and bitcoin volatility

Qingyu Wang, Qing Huang, Xiangfang Wu, Jin Tan and Panxu Sun

Finance Research Letters, 2023, vol. 58, issue PC

Abstract: Researchers are investigating whether Bitcoin exhibits haven properties during uncertainty. However, this notion often neglects various forms of uncertainty crucial to investors. In our study, we classify policy uncertainty into two categories: fiscal policy-related uncertainty and monetary policy-related uncertainty. We employ the GARCH-MIDAS model to examine the influence of two types of uncertainty on Bitcoin's volatility. We find that Bitcoin's volatility is significantly positively correlated with uncertainty related to fiscal policy. Conversely, a notable inverse relationship exists between Bitcoin's volatility and uncertainty tied to monetary policy. Our conclusion remains held when we execute a multi-variable GARCH-MIDAS model with variable selection.

Keywords: Bitcoin volatility; Fiscal policy-related uncertainty; Monetary policy-related uncertainty; GARCH-MIDAS (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:58:y:2023:i:pc:s154461232301036x

DOI: 10.1016/j.frl.2023.104664

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