The impact of FOMC announcements on cryptocurrency risk spillover across different market conditions

【Author】 Tian, Lihui; Wu, Haifeng; Xie, Qichang

【Source】REVIEW OF WORLD ECONOMICS

【影响因子】1.681

【Abstract】This paper investigates the impact of FOMC announcements on cryptocurrency risk spillovers under different market conditions and their mechanisms of action. We calculate the high-frequency RGARCH volatilities of four major dirty cryptocurrencies and six major clean currencies, and apply the quantile-expanded joint-network approach to test their risk spillovers under different market conditions, and then investigate their impact and mechanism of action by monetary shocks. The results show that: (i) the total spillover in the extreme volatility market is larger than the total spillover in the normal market, and there is a tail asymmetry. (ii) The total cryptocurrency risk spillover in the highly volatile market, the normal market, and the smooth volatility market are all positively affected by monetary shocks. (iii) Mechanism analysis shows that the FOMC announcement will have an impact on the total cryptocurrency market risk spillover through two channels, which are changing the market expectations and hedging demand. Heterogeneity analysis shows that clean cryptocurrencies have positive net spillovers to dirty cryptocurrencies, and the mutual spillovers between the two are significantly affected by monetary shocks in extremely volatile markets.

【Keywords】FOMC announcements; Dirty and clean cryptocurrencies; Cryptocurrency risk spillovers; Quantile expanded joint network; E58; G15; G23

【发表时间】2025 2025 JAN 5

【收录时间】2025-02-16

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