Journal
FINANCE RESEARCH LETTERS
Volume 38, Issue -, Pages -Publisher
ACADEMIC PRESS INC ELSEVIER SCIENCE
DOI: 10.1016/j.frl.2020.101428
Keywords
Bitcoin; Cryptocurrencies; Economic policy uncertainty; China; Volatility
Categories
Funding
- Ministry of Science and Technology of Taiwan [MOST 108-2410-H-031-082-, MOST 1082410-H-031-031-]
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Changes in China's Economic Policy Uncertainty Index can predict cryptocurrency volatility, while changes in the EPU of other countries do not have the same effect. Bitcoin and Litecoin may serve as hedging tools against China's EPU risk, but this effect may diminish after the Chinese government regulates cryptocurrency trading.
We investigate the relationship between the economic policy uncertainty index (EPU) and cryptocurrency volatility. We find that a change in EPU of China predicts cryptocurrency volatility, but a change in the EPU of the U.S., Japan, or Korea has no such effect. Moreover, changes in the China EPU are negatively associated with Bitcoin and Litecoin future volatility, which may imply that Bitcoin and Litecoin are hedging tools against the EPU risk. However, changes in China EPU may not affect the cryptocurrency volatility after the Chinese government's regulation of crypto-trading.
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