Elsayed, Ahmed H. and Sousa, Ricardo M. (2022) 'International Monetary Policy and Cryptocurrency Markets: Dynamic and Spillover Effects.', European Journal of Finance .
Using daily data over the period August 5, 2013 - September 27, 2019, this study investigates the dynamic spillovers between international monetary policies across four major economies (i.e. Eurozone, Japan, UK and US) and three key cryptocurrencies (i.e. Bitcoin, Litecoin and Ripple). In doing so, we apply a Time-Varying Parameter Vector Auto-Regression (TVP-VAR) model, a dynamic connectedness approach and network analysis. The empirical results indicate that cryptocurrency returns and monetary policy spillovers were particularly large when shadow policy rates became negative, moderated during the Fed's "tapering process", and sharpened again more recently as cryptocurrency buoyancy returned. Gross directional spillovers suggest that shadow policy rates have more "to give than to receive", while those from and to cryptocurrency returns are naturally volatile. There is also strong interconnectedness between monetary policy in either the US or the Eurozone and the UK, and between Bitcoin and Litecoin. However, the spillovers across monetary policy and cryptocurrencies tend to be muted. Finally, spillovers were only slightly larger during the Fed's "unconventional" policy compared to the "standard" era, but their composition qualitatively changed over time.
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|Publisher Web site:||https://doi.org/10.1080/1351847X.2022.2068375|
|Publisher statement:||© 2022 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group This is an Open Access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives License (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-commercial re-use, distribution, and reproduction in any medium, provided the original work is properly cited, and is not altered, transformed, or built upon in any way.|
|Date accepted:||06 April 2022|
|Date deposited:||19 April 2022|
|Date of first online publication:||16 May 2022|
|Date first made open access:||20 July 2022|
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