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Volatility spillovers of global economic policy uncertainty and fear index among cryptocurrencies: A wavelet-based DCC-GARCH approach

Author

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  • Aslan Aydogdu

    (Sivas Science and Technology University/Turkiye)

Abstract

This research analyzes the dynamic relationships between the economic and political uncertainty index and the fear index in global markets and cryptocurrencies using the wavelet-based DCC-GARCH method, considering different time scales. Monthly data sets for the periods 2012â€"April 2024 for GEPU,VIX, and Bitcoin and April 2016â€"April 2024 for Ethereum are used in the study. Findings are obtained in terms of the volatility interaction between cryptocurrencies (Bitcoin and Ethereum) and GEPU and VIX, as well as four different time scales representing the short, medium, and long term. As a result of the analysis based on raw data, it was found that there is no volatility interaction between cryptocurrencies and GEPU and VIX returns. However, there is a volatility interaction between past volatility shocks and current period volatility shocks in the 4-8 and 16-32 month investment cycle periods of VIX, Bitcoin, GEPU, and Ethereum and time scales. These results, which show that volatility shocks persist in both 4-month and 16-month investment cycles, have significant implications for investors and policymakers. They highlight the need for comprehensive information about changes in the global economy and politics, and they are expected to provide insights for both investors and policymakers.

Suggested Citation

  • Aslan Aydogdu, 2024. "Volatility spillovers of global economic policy uncertainty and fear index among cryptocurrencies: A wavelet-based DCC-GARCH approach," Journal of Applied Microeconometrics, Holistence Publications, vol. 4(1), pages 13-29.
    • Handle: RePEc:jle:joujam:jame2417
    DOI: 10.53753/jame.2417
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