Cryptocurrency Return Dependency and Economic Policy Uncertainty

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Title:	Cryptocurrency Return Dependency and Economic Policy Uncertainty
Authors:	Kuang-Chieh Yen;Wei-Ying Nie;Hsuan-Ling Chang;Li-Han Chang
Keywords:	Bitcoin;Cryptocurrencies;Dependency effect;economic policy uncertainty (EPU)
Date:	2023-07-04
Issue Date:	2024-03-01 12:05:36 (UTC+8)
Publisher:	Elsevier
Abstract:	This study investigated whether economic policy uncertainty (EPU) affects the degree of Bitcoin return dependency in the cryptocurrency (crypto) market by calculating the Pearson correlation between Bitcoin returns and the average returns of 19 cryptocurrencies to determine the return dependency. First, we found that an increase in global EPU strengthens the dependency effect. Among the country-level EPU indexes, we found that the increased EPU of crypto-friendly countries (United States, United Kingdom, Japan, and South Korea) is the main enhancer of dependency. By contrast, the EPU index of crypto-unfriendly countries (China and Russia) exhibits a statistically nonsignificant effect. Finally, the empirical results remain similar if we replace Bitcoin with Ethereum to measure dependency.
Relation:	Finance Research Letters 56,　104182
DOI:	10.1016/j.frl.2023.104182
Appears in Collections:	[Graduate Institute & Department of Banking and Finance] Journal Article

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