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The impact of the shutdown policy on the asymmetric interdependence structure and risk transmission of cryptocurrency and China’s financial market

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  • Cao, Guangxi
  • Xie, Wenhao

Abstract

By taking Bitcoin, Litecoin, and China’s gold and RMB/US dollar exchange rate market as research objects, this paper apply the MF-ADCCA and time-delayed DCCA methods to study the impact of China’s mainland shutdown of cryptocurrencies trading on the non-linear interdependent structure and risk transmission of cryptocurrencies and its financial market. Empirical results show that the cross-correlation between cryptocurrencies and China’s financial market has a long memory and asymmetric multifractal characteristics. After the shutdown, the long memory between cryptocurrencies and Chinese gold has weakened, and the long memory between cryptocurrencies and the RMB/US dollar exchange rate market was strengthened. China’s shutdown policy has a certain risk prevention effect. Specifically, after the implementation of the policy, the risk transmission of cryptocurrencies to China’s financial market has weakened, but the influence of China’s financial market has gradually strengthened.

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  • Cao, Guangxi & Xie, Wenhao, 2021. "The impact of the shutdown policy on the asymmetric interdependence structure and risk transmission of cryptocurrency and China’s financial market," The North American Journal of Economics and Finance, Elsevier, vol. 58(C).
    • Handle: RePEc:eee:ecofin:v:58:y:2021:i:c:s1062940821001327
    DOI: 10.1016/j.najef.2021.101514
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    Cited by:

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    2. José Almeida & Tiago Cruz Gonçalves, 2022. "Portfolio Diversification, Hedge and Safe-Haven Properties in Cryptocurrency Investments and Financial Economics: A Systematic Literature Review," JRFM, MDPI, vol. 16(1), pages 1-25, December.
    3. Cao, Guangxi & Xie, Wenhao, 2022. "Asymmetric dynamic spillover effect between cryptocurrency and China's financial market: Evidence from TVP-VAR based connectedness approach," Finance Research Letters, Elsevier, vol. 49(C).
    4. Raza, Syed Ali & Ahmed, Maiyra & Aloui, Chaker, 2022. "On the asymmetrical connectedness between cryptocurrencies and foreign exchange markets: Evidence from the nonparametric quantile on quantile approach," Research in International Business and Finance, Elsevier, vol. 61(C).
    5. Yang, Ming-Yuan & Wu, Zhen-Guo & Wu, Xin, 2022. "An empirical study of risk diffusion in the cryptocurrency market based on the network analysis," Finance Research Letters, Elsevier, vol. 50(C).
    6. Chowdhury, Mohammad Ashraful Ferdous & Abdullah, Mohammad & Masih, Mansur, 2022. "COVID-19 government interventions and cryptocurrency market: Is there any optimum portfolio diversification?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 81(C).

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    More about this item

    Keywords

    Cryptocurrencies; Asymmetry interdependence; Multifractal; Risk transmission; Policy effect;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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