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The relationship between the economic policy uncertainty and the cryptocurrency market

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  • Cheng, Hui-Pei
  • Yen, Kuang-Chieh

Abstract

In this paper, we investigate whether the economic policy uncertainty (EPU) index provided by Baker et al. (2016) can predict cryptocurrency returns. We show that the EPU index of China can predict the Bitcoin monthly returns while that of U.S. or other Asian countries has no predictive power. Furthermore, the China EPU index has no predictive power for the other main cryptocurrencies. Moreover, China's ban on crypto-trading affects the returns of Bitcoin only among the main cryptocurrencies.

Suggested Citation

  • Cheng, Hui-Pei & Yen, Kuang-Chieh, 2020. "The relationship between the economic policy uncertainty and the cryptocurrency market," Finance Research Letters, Elsevier, vol. 35(C).
    • Handle: RePEc:eee:finlet:v:35:y:2020:i:c:s1544612319309596
    DOI: 10.1016/j.frl.2019.101308
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    References listed on IDEAS

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    More about this item

    Keywords

    Bitcoin; Cryptocurrencies; Economic policy uncertainty; China;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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