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Dynamic spillover analysis between FX and cryptocurrency markets across different market conditions: A quantile VAR approach

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  • Kim, Young-Sung
  • Kim, Dong-Jun
  • Choi, Sun-Yong

Abstract

This study analyzes the relationship between foreign exchange (FX) markets and cryptocurrencies, focusing on both major and minor currencies. Using a quantile spillover framework, we examine how this relationship evolves under varying market conditions. The empirical findings reveal three key insights. First, spillover effects between the FX and cryptocurrency markets play a significant role in shaping their interrelationship. Under normal market conditions, the FX market has a limited influence on cryptocurrencies. Second, within the FX market, the U.S. Dollar Index exerts the most substantial impact on both major and minor currencies, while in the cryptocurrency market, Bitcoin holds the biggest influence over other cryptocurrencies. Finally, as market conditions become more extreme, spillover effects between the FX and cryptocurrency markets intensify. These findings highlight the dynamic nature of cross-market interactions and underscore the importance of considering market conditions when evaluating spillover effects between FX and cryptocurrency markets.

Suggested Citation

  • Kim, Young-Sung & Kim, Dong-Jun & Choi, Sun-Yong, 2025. "Dynamic spillover analysis between FX and cryptocurrency markets across different market conditions: A quantile VAR approach," The North American Journal of Economics and Finance, Elsevier, vol. 80(C).
    • Handle: RePEc:eee:ecofin:v:80:y:2025:i:c:s1062940825001433
    DOI: 10.1016/j.najef.2025.102503
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    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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