Abstract
This study examines the relationship between global economic policy uncertainty (GEPU) and bitcoin prices (BCP) employing the rolling window method. The full sample test shows that there is no causality between GEPU and BCP. However, the full sample causal relationship between the variables can be different when considering structural changes. The finding of the rolling window test indicates that there is causality in different subsamples. It has found both positive and negative bidirectional causalities between GEPU and BCP across various subsamples. The decision makers need to accelerate the development of blockchain technology that can be used for hedging and portfolio diversification. Moreover, enacting laws and regulations on state interventions and prohibitions ensures investor confidence. Information about policy changes should be incorporated into portfolio selection to avoid random market fluctuations. Its unregulated nature makes it more turbulent in the short term and has undergone sudden changes, so investors should be able to obtain comprehensive information about global economic and policy changes. Policy makers should ensure investor confidence by making legal regulations on state interventions and prohibitions.
Highlights
The purpose of the study is to assess the causal nexus between global economic policy uncertainty (GEPU) and bitcoin prices (BCP) considering the time variation aspect
The results show that BTC, as a safe haven, can effectively restrain the unexpected effects of global economic and policy changes
We examine the causal link between GEPU and BCP by employing the rolling window causality
Summary
The purpose of the study is to assess the causal nexus between global economic policy uncertainty (GEPU) and bitcoin prices (BCP) considering the time variation aspect. It has become increasingly important as an electronic payment tool and a speculative financial asset, which makes bitcoin (BTC) a digital gold (Urquhart, 2016). The low transaction costs and trading in unregulated systems make it popular (Blau, 2017; Kristoufek, 2015) It is considered a substitute for mainstream currencies and the last choice for investors in economic uncertainty (Bouri, Molnár, et al, 2017). These recent developments have increased the importance of examining GEPU to predict the BTC market behavior
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