“Ubiquitous uncertainties”: spillovers across economic policy uncertainty and cryptocurrency uncertainty indices

• Published in: Journal of Asian Business and Economic Studies Vol. 29; no. 1; pp. 35 - 49
• Main Authors: Foglia, Matteo, Dai, Peng-Fei
• Format: Journal Article
• Language: English
• Published: Bingley Emerald Publishing Limited 15.02.2022; Emerald Group Publishing Limited; Emerald Publishing
• Subjects: c43; c54; Causality; Commodities; Coronaviruses; COVID-19; cryptocurrency uncertainty index; d80; Digital currencies; Disease transmission; Economic policy; economic policy uncertainty; Global economy; Pandemics; Securities markets; spillover dynamics; Stock exchanges; time-varying var; Volatility; United States > US; China; Spain; Russia; C43; C54; Cryptocurrency uncertainty index; Economic policy uncertainty; Spillover dynamics; Time-varying VAR; D80
• ISSN: 2515-964X; 2515-964X
• DOI: 10.1108/JABES-05-2021-0051

PurposeThe purpose of this paper is to extend the literature on the spillovers across economic policy uncertainty (EPU) and cryptocurrency uncertainty indices.Design/methodology/approachThis paper uses cross-country economic policy uncertainty indices and the novel data measuring the cryptocurrency price uncertainties over the period 2013–2021 to construct a sample of 946 observations and applies the time-varying parameter vector autoregression (TVP-VAR) model to do an empirical study.FindingsThe findings suggest that there are cross-country spillovers of economic policy uncertainty. In addition, the total uncertainty spillover between economic policies and cryptocurrency peaked in 2015 before gradually decreasing in the following periods. Concomitantly, the cryptocurrency uncertainty has acted as the “receiver.” More importantly, the authors found the predictive power of economic policy uncertainty to predict the cryptocurrency uncertainty index. This paper’s results hold robust when using alternative measurement of cryptocurrency policy uncertainty.Originality/valueThis study is the first research that deeply investigates the association between two uncertainty indicators, namely economic policy uncertainty and the cryptocurrency uncertainty index. We provide fresh evidence about the dynamic connectedness between country-level economic policy uncertainty and the cryptocurrency index. Our work contributes a new channel driving the variants of uncertainties in the cryptocurrency market.