Dynamic Connectedness Between Uncertainty and Energy Cryptocurrencies: Evidence from TVP-VAR Connectedness Approach

Tania Klayme and Korhan K. Gokmenoglu ()
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Tania Klayme: Eastern Mediterranean University, Department of Banking and Finance
Korhan K. Gokmenoglu: Ankara HBV University, Faculty of Financial Sciences, Department of Capital Markets

A chapter in Sustainable Development in Banking and Finance, 2024, pp 223-233 from Springer

Abstract: Abstract Although cryptocurrencies gain increasing investor interest, their high energy consumption raises sustainability concerns, prompting the emergence of eco-friendly alternatives. Given that academic research on these new coins remains notably limited, we investigated the connectedness between the top three energy cryptocurrencies, Powerledger, GridPlus, and SunContract, and major uncertainty indices, Climate Policy Uncertainty (CPU) and Economic Policy Uncertainty (EPU). We used the time-varying parameter vector autoregression (TVP-VAR) monthly dataset spanning January 2018 to April 2023. The empirical results suggest that the interdependence between the energy cryptocurrencies and the uncertainty indices is moderate. EPU tends to be the highest transmitter of shocks, followed by CPU, while energy cryptocurrencies are the net receivers of shocks. Furthermore, we illustrate the total connectedness index, which reveals a high level during the COVID-19 pandemic. Our research offers insights regarding the ongoing sustainability discussions from a different perspective. Also, our findings have significant implications for asset allocation and portfolio diversification, as discussed in the conclusion.

Keywords: Energy Cryptocurrencies; Climate Policy Uncertainty; Economic Policy Uncertainty; TVP-VAR (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-3-031-65533-3_14

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DOI: 10.1007/978-3-031-65533-3_14

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