The Nexus of Sophisticated Digital Assets with Economic Policy Uncertainty: A Survey of Empirical Findings and an Empirical Investigation

Nikolaos A. Kyriazis
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Nikolaos A. Kyriazis: Department of Economics, University of Thessaly, 38333 Volos, Greece

Sustainability, 2021, vol. 13, issue 10, 1-25

Abstract: This paper sets out to explore the nexus between economic policy uncertainty (EPU) and digital currencies. An integrated survey takes place based on eleven primary studies. Furthermore, an econometric analysis is conducted by the threshold ARCH, simple asymmetric ARCH and non-linear ARCH specifications covering the bull and the bear markets as well as the highly volatile period up to the present. Threshold ARCH is found to provide the best fit for estimations. Outcomes reveal that Bitcoin is strongly connected with EPU while Ethereum and Litecoin are not but are strongly linked with Bitcoin performance. Moreover, weak negative effects of the VIX on both cryptocurrencies are detected while oil exerts weak positive impacts on Ethereum. Overall, Ethereum and Litecoin could serve for diversifiers against Bitcoin or hedgers against traditional assets during highly stressed periods with the advantage of not being affected by economic policy uncertainty news.

Keywords: economic policy uncertainty; cryptocurrency; Bitcoin; threshold ARCH; survey; oil; VIX (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:13:y:2021:i:10:p:5383-:d:552611

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