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BitCoin: A new basket for eggs?

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  • Qin, Meng
  • Su, Chi-Wei
  • Tao, Ran

Abstract

This paper explores the role of Bitcoin in diversifying investment risks during periods of high global economic policy uncertainty. It employs the bootstrap full- and sub-sample rolling-window Granger causality tests to investigate the mutual causal influence between global economic policy uncertainty and Bitcoin returns. It finds that global economic policy uncertainty has both positive and negative causal impacts on Bitcoin returns, suggesting that Bitcoin cannot always be viewed as a new basket for eggs since it can not always be considered to hedge policy uncertainty. The paper finds a positive reverse causal impact of Bitcoin returns on global economic policy uncertainty, indicating that the Bitcoin market contains useful information to forecast global economic policy uncertainty. Additional analyses suggest that global economic policy uncertainty also contains valuable information to improve the prediction of returns and volatility in the Bitcoin market. Under the recent global trade tensions and complex economic environment, these analyses imply that investors and countries can exploit the Bitcoin market to optimize their investment.

Suggested Citation

  • Qin, Meng & Su, Chi-Wei & Tao, Ran, 2021. "BitCoin: A new basket for eggs?," Economic Modelling, Elsevier, vol. 94(C), pages 896-907.
    • Handle: RePEc:eee:ecmode:v:94:y:2021:i:c:p:896-907
    DOI: 10.1016/j.econmod.2020.02.031
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    More about this item

    Keywords

    Bitcoin price; Global economic policy uncertainty; Causal relationship; Time-varying;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions

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