Cryptocurrency Volatility as a Digital Cost-Push Shock

Shen Zhang ()
Additional contact information
Shen Zhang: London School of Commerce

Journal of Economics and Financial Analysis, 2025, vol. 9, issue 2, 33-48

Abstract: This paper examines whether cryptocurrency market volatility operates as an auxiliary cost-push pressure within the New Keynesian Phillips Curve framework. Using quarterly data for the United States from 2010Q1 to 2025Q1, we estimate closed- and open-economy hybrid NKPC specifications augmented with an aggregate measure of crypto volatility constructed from the Garman–Klass estimator applied to the top 100 cryptocurrencies by market capitalization. Crypto volatility is interpreted as capturing digital-financial uncertainty, energy-cost pressures, and expectation-related effects that are not fully reflected in standard macroeconomic variables. Generalized Method of Moments estimations indicate that crypto volatility enters inflation dynamics with a consistently positive coefficient in forward-looking and hybrid specifications, while remaining insignificant in purely backward-looking models. Controlling for crypto volatility slightly attenuates the estimated Phillips curve slope, suggesting that digital financial instability conditions observed inflation–slack relationships rather than replacing them. Overall, the findings point to cryptocurrency markets as a complementary transmission channel linking financial volatility and inflation dynamics in the post-2010 U.S. economy.

Keywords: New Keynesian Phillips Curve; Cryptocurrency Volatility; Cost-Push Shocks; Inflation Dynamics; Digital Finance. (search for similar items in EconPapers)
JEL-codes: E31 E52 F41 G15 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://ojs.tripaledu.com/jefa/article/download/108/114 (application/pdf)

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: https://EconPapers.repec.org/RePEc:trp:01jefa:jefa0085

DOI: 10.1991/jefa.v9i2.a80

Access Statistics for this article

Journal of Economics and Financial Analysis is currently edited by David Simon Hall

More articles in Journal of Economics and Financial Analysis from Tripal Publishing House
Bibliographic data for series maintained by David Simon Hall ().