Economic Uncertainty and Bitcoin Volatility: Evidence During COVID-19

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Maria Ghani
Usman Ghani
Shujahat Ali
Muhammad Mustafa
Rehana Kosar


This research investigates the predictability of economic uncertainty indexes on the volatility of Bitcoin (BTC) during COVID-19. The economic uncertainty indexes include US economic policy uncertainty (EPU), Twitter economic uncertainty (TEU), Twitter market uncertainty (TMU), geopolitical risk index (GPR), and trade policy uncertainty (TPU) index. The empirical findings show that the Twitter market uncertainty (TMU) and geopolitical risk (GPR) uncertainty index are valuable predictors of BTC volatility. Moreover, the combination forecasts information for all economic uncertainty indexes is useful for BTC volatility forecasting. Also, we find evidence during high and low volatility and the Russia–Ukraine war. Our results show that Twitter market uncertainty and geopolitical risk uncertainty index are effective predictors of Bitcoin volatility during high volatility periods. During the Russia–Ukraine war, economic policy uncertainty (EPU), the Twitter market uncertainty index, and combination forecast information for all uncertainty indexes are effective for Bitcoin volatility prediction. Our findings are robust with the alternative method MCS test.

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