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Cryptocurrencies, stocks, and economic policy uncertainty: A FAVAR analysis

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  • Civelli, Andrea
  • Jackson, Laura E.

Abstract

We study the interactions between cryptocurrencies, stocks, and U.S. economic policy uncertainty (EPU) using a Factor-Augmented Vector Autoregressive framework, in which return comovements within each asset market are modeled by a single common factor. We document a remarkable heterogeneity across cryptocurrencies, with market fragmentation by functional characteristics of the projects. Through structural impulse-response analysis, we find that: (1) Stock returns positively respond to crypto shocks, but not vice versa; (2) Cryptocurrencies can be used to hedge against U.S. EPU, but display safe-haven characteristics against Chinese EPU. We interpret these results in light of recent crypto investment and pricing models.

Suggested Citation

  • Civelli, Andrea & Jackson, Laura E., 2025. "Cryptocurrencies, stocks, and economic policy uncertainty: A FAVAR analysis," The North American Journal of Economics and Finance, Elsevier, vol. 78(C).
    • Handle: RePEc:eee:ecofin:v:78:y:2025:i:c:s1062940825000452
    DOI: 10.1016/j.najef.2025.102405
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    More about this item

    Keywords

    Cryptocurrencies; Blockchain; Financial markets; Macroeconomic shocks; FAVAR;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F3 - International Economics - - International Finance
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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