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How do economic policy uncertainty and geopolitical risk drive Bitcoin volatility?

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  • Ben Nouir, Jihed
  • Ben Haj Hamida, Hayet

Abstract

We investigate how economic policy uncertainty (EPU) and geopolitical risks (GPR) impact Bitcoin volatility with respect to factors related to type and nationality of uncertainty, investigated period, relationship horizon and extreme conditions. Applying ARDL model and quantile regression for monthly data from August 2010 to September 2021, we reveal that June 2014 corresponds to a key date that marks a reversal in the investigated relationship. Furthermore, we show that the relationship between uncertainty and bitcoin volatility changes according to different factors. US uncertainty has short run effects on Bitcoin volatility, while China’s uncertainty has rather long run effects. Moreover, Bitcoin volatility responds in the same manner to US EPU and GPR, while, it responds differently to China's EPU and GPR. In extreme quantiles, we find that Bitcoin hedges against US EPU and GPR. Further, Bitcoin hedges against either individual or joint effects of US uncertainty, but not both.

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  • Ben Nouir, Jihed & Ben Haj Hamida, Hayet, 2023. "How do economic policy uncertainty and geopolitical risk drive Bitcoin volatility?," Research in International Business and Finance, Elsevier, vol. 64(C).
    • Handle: RePEc:eee:riibaf:v:64:y:2023:i:c:s0275531922001957
    DOI: 10.1016/j.ribaf.2022.101809
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    More about this item

    Keywords

    Bitcoin volatility; Economic policy uncertainty (EPU); Geopolitical risk (GPR); ARDL method; Quantile regression; June 2014;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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