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Correlation between geopolitical risk, economic policy uncertainty, and Bitcoin using partial and multiple wavelet coherence in P5 + 1 nations

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  • Singh, Sanjeet
  • Bansal, Pooja
  • Bhardwaj, Nav

Abstract

This study analyses the time–frequency relationship between economic policy uncertainty (EPU), geopolitical risk (GPR), and Bitcoin returns in China, France, Russia, the UK, the US, and Germany. Bi-wavelet, partial wavelet, and multiple wavelet coherence (MWC) analyses are employed to examine the co-movements between these variables on monthly data from July, 2016, to June, 2021. The empirical findings reveal (i) strong interdependence between EPU, GPR, and Bitcoin returns in short- and long-terms in most countries, as inferred from MWC analysis. (ii) There is evidence of strong short-term co-movements between GPR and EPU, with GPR leading. The results of partial wavelet analysis imply that the two are positively correlated for most countries and Bitcoin returns have no significant impact on their co-movement. (iii) The results of bi-wavelet coherence analyses show strong positive connectedness in the short term between all pairs of EPU, GPR, and Bitcoin returns in most countries analyzed.

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  • Singh, Sanjeet & Bansal, Pooja & Bhardwaj, Nav, 2022. "Correlation between geopolitical risk, economic policy uncertainty, and Bitcoin using partial and multiple wavelet coherence in P5 + 1 nations," Research in International Business and Finance, Elsevier, vol. 63(C).
    • Handle: RePEc:eee:riibaf:v:63:y:2022:i:c:s0275531922001428
    DOI: 10.1016/j.ribaf.2022.101756
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    Cited by:

    1. Che, Ming & Zhu, Zixiang & Li, Yujia, 2023. "Geopolitical risk and economic policy uncertainty: Different roles in China's financial cycle," International Review of Financial Analysis, Elsevier, vol. 90(C).
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    3. Cao, Yan & Cheng, Sheng & Li, Xinran, 2024. "Co-movements between heterogeneous crude oil and food markets: Does temperature change really matter?," Research in International Business and Finance, Elsevier, vol. 67(PB).
    4. Będowska-Sójka, Barbara & Górka, Joanna & Hemmings, Danial & Zaremba, Adam, 2024. "Uncertainty and cryptocurrency returns: A lesson from turbulent times," International Review of Financial Analysis, Elsevier, vol. 94(C).
    5. Almeida, José & Gaio, Cristina & Gonçalves, Tiago Cruz, 2024. "Crypto market relationships with bric countries' uncertainty – A wavelet-based approach," Technological Forecasting and Social Change, Elsevier, vol. 200(C).
    6. Alam, Ahmed W. & Houston, Reza & Farjana, Ashupta, 2023. "Geopolitical risk and corporate investment: How do politically connected firms respond?," Finance Research Letters, Elsevier, vol. 53(C).
    7. Ştefan Cristian Gherghina & Liliana Nicoleta Simionescu, 2023. "Exploring the asymmetric effect of COVID-19 pandemic news on the cryptocurrency market: evidence from nonlinear autoregressive distributed lag approach and frequency domain causality," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-58, December.

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    More about this item

    Keywords

    Geopolitical risk (GPR); Economic policy uncertainty (EPU); Cryptocurrency (Bitcoin); Wavelet theory; P5 + 1 nations;
    All these keywords.

    JEL classification:

    • P5 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems

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