IDEAS home Printed from https://ideas.repec.org/a/gam/jmathe/v11y2022i1p196-d1019983.html
   My bibliography  Save this article

Are COVID-19-Related Economic Supports One of the Drivers of Surge in Bitcoin Market? Evidence from Linear and Non-Linear Causality Tests

Author

Listed:
  • Mustafa Özer

    (Department of Economics, Faculty of Economics and Administrative Sciences, Anadolu University, 26470 Eskişehir, Turkey)

  • Serap Kamisli

    (Department of Finance and Banking, Faculty of Applied Sciences, Bilecik Seyh Edebali University, 11100 Bilecik, Turkey)

  • Fatih Temizel

    (Department of Business Administration, Faculty of Economics and Administrative Sciences, Anadolu University, 26470 Eskişehir, Turkey)

  • Melik Kamisli

    (Department of Finance and Banking, Faculty of Applied Sciences, Bilecik Seyh Edebali University, 11100 Bilecik, Turkey)

Abstract

The aim of this study was to investigate the causal relations between COVID-19 economic supports and Bitcoin markets. For this purpose, we first determined the degree of the integration of variables by implementing Fourier Augmented Dickey–Fuller unit root tests. Then, we carried out both linear (Bootstrap Toda–Yamamoto) and non-linear (Fractional Frequency Flexible Fourier form Toda–Yamamoto) causality tests to consider the nonlinearities in variables, to determine if the effects of multiple structural breaks were temporary or permanent, and to evaluate the unidirectional causality running from COVID-19-related economic supports and the price, volatility, and trading volume of Bitcoin. Our study included 158 countries, and we used daily data over the period from 1 January 2020 and 10 March 2022. The findings of this study provide evidence of unidirectional causalities running from COVID-19-related economic supports to the price, volatility, and trading volume of Bitcoin in most of the countries in the sample. The application of non-linear causality tests helped us obtain more evidence about these causalities. Some of these causalities were found to be permanent, and some of them were found to be temporary. The results of the study indicate that COVID-19-related economic supports can be considered a major driver of the surge in the Bitcoin market during the pandemic.

Suggested Citation

  • Mustafa Özer & Serap Kamisli & Fatih Temizel & Melik Kamisli, 2022. "Are COVID-19-Related Economic Supports One of the Drivers of Surge in Bitcoin Market? Evidence from Linear and Non-Linear Causality Tests," Mathematics, MDPI, vol. 11(1), pages 1-24, December.
    • Handle: RePEc:gam:jmathe:v:11:y:2022:i:1:p:196-:d:1019983
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2227-7390/11/1/196/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2227-7390/11/1/196/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Christopoulos Dimitris K & Leon-Ledesma Miguel A., 2011. "International Output Convergence, Breaks, and Asymmetric Adjustment," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 15(3), pages 1-33, May.
    2. Thomas Hale & Noam Angrist & Rafael Goldszmidt & Beatriz Kira & Anna Petherick & Toby Phillips & Samuel Webster & Emily Cameron-Blake & Laura Hallas & Saptarshi Majumdar & Helen Tatlow, 2021. "A global panel database of pandemic policies (Oxford COVID-19 Government Response Tracker)," Nature Human Behaviour, Nature, vol. 5(4), pages 529-538, April.
    3. Bozoklu, Seref & Yilanci, Veli & Gorus, Muhammed Sehid, 2020. "Persistence in per capita energy consumption: A fractional integration approach with a Fourier function," Energy Economics, Elsevier, vol. 91(C).
    4. Zhang, Dayong & Hu, Min & Ji, Qiang, 2020. "Financial markets under the global pandemic of COVID-19," Finance Research Letters, Elsevier, vol. 36(C).
    5. Nuruddeen Usman & Kodili Nwanneka & Nduka, 2023. "Announcement Effect of COVID-19 on Cryptocurrencies," Asian Economics Letters, Asia-Pacific Applied Economics Association, vol. 3(3), pages 1-4.
    6. Sarkodie, Samuel Asumadu & Ahmed, Maruf Yakubu & Owusu, Phebe Asantewaa, 2022. "COVID-19 pandemic improves market signals of cryptocurrencies–evidence from Bitcoin, Bitcoin Cash, Ethereum, and Litecoin," Finance Research Letters, Elsevier, vol. 44(C).
    7. Hui Xiao & Xiong Xiong & Weiwei Chen, 2021. "Introduction to the special issue on Impact of COVID-19 and cryptocurrencies on the global financial market," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 7(1), pages 1-2, December.
    8. Jong-Min Kim & Chanho Cho & Chulhee Jun, 2022. "Forecasting the Price of the Cryptocurrency Using Linear and Nonlinear Error Correction Model," JRFM, MDPI, vol. 15(2), pages 1-10, February.
    9. Ozdemir, Huseyin & Ozdemir, Zeynel Abidin, 2021. "A Survey of Hedge and Safe Havens Assets against G-7 Stock Markets before and during the COVID-19 Pandemic," IZA Discussion Papers 14888, Institute of Labor Economics (IZA).
    10. Dilawar Khan & Nihal Ahmed & Bahtiyar Mehmed & Ihtisham ul Haq, 2021. "Assessing the Impact of Policy Measures in Reducing the COVID-19 Pandemic: A Case Study of South Asia," Sustainability, MDPI, vol. 13(20), pages 1-12, October.
    11. Emna Mnif & Anis Jarboui, 2021. "COVID-19, bitcoin market efficiency, herd behaviour," Review of Behavioral Finance, Emerald Group Publishing Limited, vol. 13(1), pages 69-84, March.
    12. Ciner, Cetin, 2011. "Information transmission across currency futures markets: Evidence from frequency domain tests," International Review of Financial Analysis, Elsevier, vol. 20(3), pages 134-139, June.
    13. Darko Vukovic & Moinak Maiti & Zoran Grubisic & Elena M. Grigorieva & Michael Frömmel, 2021. "COVID-19 Pandemic: Is the Crypto Market a Safe Haven? The Impact of the First Wave," Sustainability, MDPI, vol. 13(15), pages 1-17, July.
    14. Gamze Ozturk Danisman & Ender Demir & Adam Zaremba, 2021. "Financial Resilience To The Covid-19 Pandemic: The Role Of Banking Market Structure," Applied Economics, Taylor & Francis Journals, vol. 53(39), pages 4481-4504, August.
    15. Enders, Walter & Lee, Junsoo, 2012. "The flexible Fourier form and Dickey–Fuller type unit root tests," Economics Letters, Elsevier, vol. 117(1), pages 196-199.
    16. Shah, Muhammad Ibrahim & Kirikkaleli, Dervis & Adedoyin, Festus Fatai, 2021. "Regime switching effect of COVID-19 pandemic on renewable electricity generation in Denmark," Renewable Energy, Elsevier, vol. 175(C), pages 797-806.
    17. Anoop S Kumar, 2020. "Testing Safe Haven Property of Bitcoin and Gold during Covid-19 : Evidence from Multivariate GARCH analysis," Economics Bulletin, AccessEcon, vol. 40(3), pages 2005-2015.
    18. R. Scott Hacker & Abdulnasser Hatemi-J, 2006. "Tests for causality between integrated variables using asymptotic and bootstrap distributions: theory and application," Applied Economics, Taylor & Francis Journals, vol. 38(13), pages 1489-1500.
    19. Omay, Tolga, 2015. "Fractional Frequency Flexible Fourier Form to approximate smooth breaks in unit root testing," Economics Letters, Elsevier, vol. 134(C), pages 123-126.
    20. Lahmiri, Salim & Bekiros, Stelios, 2020. "The impact of COVID-19 pandemic upon stability and sequential irregularity of equity and cryptocurrency markets," Chaos, Solitons & Fractals, Elsevier, vol. 138(C).
    21. David Y. Aharon & Zaghum Umar & Xuan Vinh Vo, 2021. "Dynamic spillovers between the term structure of interest rates, bitcoin, and safe-haven currencies," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 7(1), pages 1-25, December.
    22. Gunda Alexandra Detmers & Sui-Jade Ho & Özer Karagedikl, 2022. "Understanding consumer inflation expectations during the COVID-19 pandemic," CAMA Working Papers 2022-11, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    23. Baur, Dirk G. & Hong, KiHoon & Lee, Adrian D., 2018. "Bitcoin: Medium of exchange or speculative assets?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 54(C), pages 177-189.
    24. Chkili, Walid & Ben Rejeb, Aymen & Arfaoui, Mongi, 2021. "Does bitcoin provide hedge to Islamic stock markets for pre- and during COVID-19 outbreak? A comparative analysis with gold," Resources Policy, Elsevier, vol. 74(C).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ştefan Cristian Gherghina & Liliana Nicoleta Simionescu, 2023. "Exploring the asymmetric effect of COVID-19 pandemic news on the cryptocurrency market: evidence from nonlinear autoregressive distributed lag approach and frequency domain causality," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-58, December.
    2. Koç, Pınar & Gülmez, Ahmet, 2021. "Analysis of relationships between nanotechnology applications, mineral saving and ecological footprint: Evidence from panel fourier cointegration and causality tests," Resources Policy, Elsevier, vol. 74(C).
    3. Veli YILANCI & Sertaç HOPOĞLU & Hakan ERYÜZLÜ, 2023. "The impact of the economic policy uncertainty and geopolitical risks on tourism demand of Mexico," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(3(636), A), pages 147-164, Autumn.
    4. Kassouri, Yacouba, 2022. "Boom-bust cycles in oil consumption: The role of explosive bubbles and asymmetric adjustments," Energy Economics, Elsevier, vol. 111(C).
    5. Ihsan Erdem Kayral & Ahmed Jeribi & Sahar Loukil, 2023. "Are Bitcoin and Gold a Safe Haven during COVID-19 and the 2022 Russia–Ukraine War?," JRFM, MDPI, vol. 16(4), pages 1-22, April.
    6. Ben Khelifa, Soumaya & Guesmi, Khaled & Urom, Christian, 2021. "Exploring the relationship between cryptocurrencies and hedge funds during COVID-19 crisis," International Review of Financial Analysis, Elsevier, vol. 76(C).
    7. Danai Likitratcharoen & Pan Chudasring & Chakrin Pinmanee & Karawan Wiwattanalamphong, 2023. "The Efficiency of Value-at-Risk Models during Extreme Market Stress in Cryptocurrencies," Sustainability, MDPI, vol. 15(5), pages 1-21, March.
    8. Silva Lopes, Artur C., 2021. "Most likely you go your way (and I'll go mine): non-convergent incomes with a new DF-Fourier test," MPRA Paper 107676, University Library of Munich, Germany, revised 19 Mar 2021.
    9. Xu, Lei & Kinkyo, Takuji, 2023. "Hedging effectiveness of bitcoin and gold: Evidence from G7 stock markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 85(C).
    10. Eda Fendoğlu, 2021. "Stationarity Test of Renewable Energy Consumption with Fractional Frequency Fourier Unit Root Test: Evidence from BRICS-T Countries," Alphanumeric Journal, Bahadir Fatih Yildirim, vol. 9(1), pages 99-110, June.
    11. Silva Lopes, Artur, 2020. "Revisiting income convergence with DF-Fourier tests: old evidence with a new test," MPRA Paper 102208, University Library of Munich, Germany.
    12. Pata, Ugur Korkut & Yilanci, Veli & Zhang, Qianxiao & Shah, Syed Ale Raza, 2022. "Does financial development promote renewable energy consumption in the USA? Evidence from the Fourier-wavelet quantile causality test," Renewable Energy, Elsevier, vol. 196(C), pages 432-443.
    13. Danai Likitratcharoen & Nopadon Kronprasert & Karawan Wiwattanalamphong & Chakrin Pinmanee, 2021. "The Accuracy of Risk Measurement Models on Bitcoin Market during COVID-19 Pandemic," Risks, MDPI, vol. 9(12), pages 1-16, December.
    14. Wasiuzzaman, Shaista & Haji Abdul Rahman, Hajah Siti Wardah, 2021. "Performance of gold-backed cryptocurrencies during the COVID-19 crisis," Finance Research Letters, Elsevier, vol. 43(C).
    15. Assaf, Ata & Mokni, Khaled & Yousaf, Imran & Bhandari, Avishek, 2023. "Long memory in the high frequency cryptocurrency markets using fractal connectivity analysis: The impact of COVID-19," Research in International Business and Finance, Elsevier, vol. 64(C).
    16. Judit Temesvary & Andrew Wei, 2021. "Domestic Lending and the Pandemic: How Does Banks' Exposure to Covid-19 Abroad Affect Their Lending in the United States?," Finance and Economics Discussion Series 2021-056r1, Board of Governors of the Federal Reserve System (U.S.), revised 17 Nov 2021.
    17. Maneejuk, Paravee & Kaewtathip, Nuttaphong & Jaipong, Peemmawat & Yamaka, Woraphon, 2022. "The transition of the global financial markets' connectedness during the COVID-19 pandemic," The North American Journal of Economics and Finance, Elsevier, vol. 63(C).
    18. Nguyen, Huu Manh & Bakry, Walid & Vuong, Thi Huong Giang, 2023. "COVID-19 pandemic and herd behavior: Evidence from a frontier market," Journal of Behavioral and Experimental Finance, Elsevier, vol. 38(C).
    19. Adediran, Idris A. & Yinusa, Olalekan D. & Lakhani, Kanwal Hammad, 2021. "Where lies the silver lining when uncertainty hang dark clouds over the global financial markets?," Resources Policy, Elsevier, vol. 70(C).
    20. Durusu-Ciftci, Dilek & Soytas, Ugur & Nazlioglu, Saban, 2020. "Financial development and energy consumption in emerging markets: Smooth structural shifts and causal linkages," Energy Economics, Elsevier, vol. 87(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jmathe:v:11:y:2022:i:1:p:196-:d:1019983. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.