Does economic policy uncertainty affect cryptocurrency markets? Evidence from Twitter-based uncertainty measures

Wanshan Wu, Aviral Tiwari, Giray Gözgör and Huang Leping

Research in International Business and Finance, 2021, vol. 58, issue C

Abstract: Using daily data from August 9, 2015, to July 7, 2020, this study examines the effects of economic policy uncertainty (EPU) on the returns of four cryptocurrencies: Bitcoin, Ethereum, Litecoin, and Ripple. To this end, two new measures of EPU (Twitter-based economic uncertainty and Twitter-based market uncertainty) are considered. A Granger causality test using the recursive evolving window approach shows a significant causality between the Twitter-based EPU measures and the BTC/USD exchange rate from October 2016 to July 2017. Moreover, a significant causality was noted from the EPU measures to the ETH/USD exchange rate from June 2019 to February 2020 and from the EPU measures to the XRP/USD exchange rate from January 2020 to February 2020. The Twitter-based EPU measures primarily positively affect the returns of the related cryptocurrencies during these periods. These results are robust to different measures of Twitter-based EPU and different econometric techniques. Potential implications, including the COVID-19 era, are also discussed.

Keywords: Cryptocurrencies; Economic policy uncertainty; Twitter-based uncertainty measures; Granger causality tests; Recursive evolving window approach; COVID-19 crisis (search for similar items in EconPapers)
JEL-codes: C22 D81 G15 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (33)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:58:y:2021:i:c:s0275531921000994

DOI: 10.1016/j.ribaf.2021.101478

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