Non-linear causal linkages of EPU and gold with major cryptocurrencies during bull and bear markets

• Published in: The North American journal of economics and finance Vol. 56; p. 101343
• Main Authors: Papadamou, Stephanos, Kyriazis, Nikolaos A., Tzeremes, Panayiotis G.
• Format: Journal Article
• Language: English
• Published: Elsevier Inc 01.04.2021
• Subjects: Bear market; Bull market; Cryptocurrencies; Economic policy uncertainty index; Gold; Cryptocurrencies; Gold; Bull market; Economic policy uncertainty index; G11; G15; Bear market
• ISSN: 1062-9408; 1879-0860
• DOI: 10.1016/j.najef.2020.101343

•Half of the cryptocurrencies tightly connected to EPU during bull markets.•More currencies are linked with EPU during bear markets.•Gold is more influential during bear markets.•Causality in variance is significant in all but the higher quantiles. This paper sets out to explore whether the innovative Economic Policy Uncertainty (EPU) index and the safe haven asset of gold influence returns of high-capitalization cryptocurrencies in a non-linear manner. Estimations take place both concerning flourishing and stressed periods in the digital currency markets. Econometric outcomes reveal that the returns of almost half of the cryptocurrencies investigated are tightly connected to the EPU index in bull markets while even more currencies are linked with the index during bear markets. Similar findings are revealed as concerns gold as it proves to be more influential during bear markets due to its hedging capacities. There is also evidence that causality in variance is significant in all but the higher quantile concerning both EPU and gold estimations in both bull and bear markets.