Investigating Factors Affecting the Price Fluctuations of Cryptocurrencies with an Emphasis on Monetary and Fiscal Policies of the United States

Document Type : Original Article

Authors

1 PhD in Economics, Razi university, Kermanshah

2 Professor in Economics, Razi university, Kermanshah

3 Professor of Economics, Dept. of Economic, Faculty of Economics and Accounting, Razi University, Kermanshah, Iran.

Abstract

Cryptocurrencies as an emerging phenomenon have attracted a lot of attention in the last two decades. Extreme fluctuations in the price of cryptocurrencies have doubled the importance of identifying and influencing factors affecting price changes in financial markets. In this research, the influencing factors on the price fluctuations of cryptocurrencies have been investigated with an emphasis on the monetary and financial policies of the United States. In this research, 26 factors affecting the price fluctuations of cryptocurrencies were evaluated. The current research is practical and monthly data was used in the period from 2010 to 2022. In this article, the approach of GARCH and random fluctuation models has been used to extract the price fluctuation of digital currencies, and TVPDMA, TVPDMS and BMA models have been used to identify the most important variables affecting the fluctuation of this variable. Based on the results, SV models are more accurate than GARCH models in extracting fluctuations. Among TVPDMA, TVPDMS and BMA models, BMA model had higher accuracy. USD and EUR exchange rate variables, market leader tweets, number of trades, network difficulty, US liquidity growth, opening price and trading volume; The most important variables affecting the fluctuation of the price of cryptocurrencies are. Based on the results of the monetary policies of the United States, it has a significant effect on the volatility of the cryptocurrency market; But this significant effect was not observed in financial policies. Considering that the monetary policies of the United States cause bubbles and fluctuations in asset prices; Especially the cryptocurrency market has become; It is suggested that the Federal Reserve is committed to conducting monetary policies based on Friedman's monetary growth rate rule, which indicates an increase in liquidity growth equal to GDP growth; So that the increase in liquidity in this country has the lowest negative spillover effect at the global level.

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History

  • Receive Date: 22 June 2023
  • Revise Date: 03 September 2023
  • Accept Date: 03 September 2023

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