Economics at your fingertips  

Cryptocurrencies vs. US dollar: Evidence from causality in quantiles analysis

Khaled Mokni () and Ahdi Noomen Ajmi

Economic Analysis and Policy, 2021, vol. 69, issue C, 238-252

Abstract: This study investigates the causal relationship between the top-five cryptocurrencies and the US dollar at different levels of the return’s distribution. We address this issue based on the Granger-causality in quantiles before and during the ongoing COVID-19 health crisis. The Granger causality test in mean shows a significant causal relationship between the two markets mainly during the COVID-19 pandemic period. By differentiating between markets states, the causality in quantiles test indicates evidence of causality between the US dollar and cryptocurrencies generally at the upper and lower tails of the distribution. Moreover, during the health crisis period, the US dollar loses its predictive power in favor of cryptocurrencies, which can act as good predictors and play a hedging role against the US dollar variations. Further analysis of the sign of causality indicates that each currency market’s effect on the other depends on the distribution level and the sub-period. We find that the recent COVID-19 crisis has had a considerable effect on the crypto-conventional currencies’ relationship and has established a more important place for cryptocurrencies in the financial system.

Keywords: Cryptocurrencies; Dollar index; Granger causality in quantiles; COVID-19 pandemic (search for similar items in EconPapers)
JEL-codes: C22 D53 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 (7) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.1016/j.eap.2020.12.011

Access Statistics for this article

Economic Analysis and Policy is currently edited by Clevo Wilson

More articles in Economic Analysis and Policy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

Page updated 2023-06-15
Handle: RePEc:eee:ecanpo:v:69:y:2021:i:c:p:238-252