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Stability between cryptocurrency prices and the term structure

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  • Castle, Jennifer L.
  • Kurita, Takamitsu

Abstract

The rapid expansion of the global cryptocurrency market raises the question of whether there are stable relationships between the prices of representative cryptocurrencies and economic indicators capturing expectations of future monetary policy. Multivariate time-series analysis reveals a single but significant cointegrating relationship between cryptocurrencies and the US term spread. This evidence allows us to explore cointegration-based control analysis of the data, which results in direct policy implications for the implementation of monetary policy allowing for the growing influence of digital assets. Structural breaks due to Tesla terminating the use of Bitcoin for car sales and the US inflation shock in 2022 must be handled, maintaining the stability of the relationship between cryptocurrencies and the term spread.

Suggested Citation

  • Castle, Jennifer L. & Kurita, Takamitsu, 2024. "Stability between cryptocurrency prices and the term structure," Journal of Economic Dynamics and Control, Elsevier, vol. 165(C).
    • Handle: RePEc:eee:dyncon:v:165:y:2024:i:c:s0165188924000824
    DOI: 10.1016/j.jedc.2024.104890
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    2. Josué Thélissaint, 2024. "Assessing Cryptomarket Risks: Macroeconomic Forces, Market Shocks and Behavioural Dynamics," Economics Working Paper Archive (University of Rennes & University of Caen) 2024-14, Center for Research in Economics and Management (CREM), University of Rennes, University of Caen and CNRS.

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    More about this item

    Keywords

    Cryptocurrencies; Cointegration; Weak exogeneity; Policy simulation; Structural breaks; Term structure;
    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
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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